Every year around April 15, you’ll hear adults of all ages groan about “Tax Day.” That’s because federal and state income tax forms are due around that time. But have you ever wondered why you have to pay taxes?
In the United States, we have governments at the local, state and national (federal) levels. These governments have various parts to them, including legislators (who make laws), executives (who enforce laws), judges, and many others. The money these government workers receive to do their jobs comes from taxes.
Taxes take many forms, too. When you work at a job to make money, you pay income taxes. Depending on how much money you make, a certain percentage (part) of the money you make is withheld (kept out of your paycheck and sent to the government).
When you buy things at a store, you also usually pay sales tax, which is a percentage of the cost of the item charged by the store. If you own property, you also pay property taxes on the value of your property.
Paying your taxes is considered a civic duty, although doing so is also a requirement of the law. If you do not pay your taxes, the government agency that oversees taxes — the Internal Revenue Service or IRS — will require you to pay your taxes or else face penalties, such as fines or going to jail.
The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax dollars also help to support common resources, such as police and firefighters.
Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools!
Each year when “Tax Day” rolls around, adults of all ages must report their income to the IRS, using special tax forms. There are many, many laws that set forth complicated rules about how much tax is owed and what kinds of special expenses can be used (“written off”) to lower the amount of taxes you need to pay.
For the average worker, tax money has been withheld from paychecks throughout the year. On “Tax Day,” each worker reports his or her income and expenses to the IRS.
Employers also report to the IRS how much they paid each worker. The IRS compares all these numbers to make sure that each person pays the correct amount of taxes.
If you haven’t had enough tax money withheld from your checks throughout the year to cover the amount of tax you owe, you will have to send more money (“pay in”) to the government. If, however, too much tax money was withheld from your paychecks, you will receive a check (get a “refund”) from the government.
Try It Out
Are you ready to pay up? Be sure to check out the following activities with a friend or family member:
Although you won’t have to worry about paying income taxes until you have a job, there is one tax you’re probably already familiar with: sales tax. The next time you head to the store, bring a calculator with you. As you travel the aisles of the store, look at the prices of products. Use the calculator to figure out how much each product would be if you purchased it. For example, if you see a toy truck for $2 and your local tax rate is 6% (six cents for every one dollar), you would multiply $2.00 by 0.06 to get the amount of sales tax you’d pay, which is $0.12. Then you would add $0.12 and $2 to get the total cost of the truck, $2.12. It’s important to remember sales tax when you start saving up for an important purchase you want to make. Always remember to calculate how much an item will cost — after tax — so you’ll be sure you have enough money when it’s time to head to the store!
Talk with an adult friend or family member about their views on taxes. Do they think they pay too much in taxes? Why or why not? What kinds of things do they think their tax money should be used for? Are there things that governments spend money on that they don’t think is worth it? Ask for examples, if so. What kinds of avenues exist for objecting to the way your tax money is spent?
Ask an adult friend or family member to go with you on a walk or take you for a drive around your hometown. Bring along a piece of paper and a pencil. As you walk or drive around, look for examples of your tax dollars at work. Do you see roads being repaired? Is there a public library in your town? What about police and firefighters? Try to come up with a list of at least 10 examples of your tax dollars at work. You might be surprised at how far your tax dollars go to provide services shared by everyone in your community!