Why Do I Have to Pay Taxes?
Taxes are the main source of money for federal, state
and local governments. If people did not pay taxes,
we would not have many of the things we have come
to enjoy – like nice roads, free public school education,
and a military to protect our country - to name just a
few things. Here is a comprehensive list of all of the
Federal Agencies in the US government.
Filing your income taxes in April is like "settling up" with the IRS. You’ve been paying taxes all year long, so in April you figure out if you paid the right amount that you owe. The form that most people use is the 1040. If you paid too much in taxes, you will get a refund. If you did not pay enough, you will have to pay. You will have until April 15th to do your taxes and send them to the Internal Revenue Service.
Federal Income Tax – tax rates are set by brackets and they vary so you will need to consult a Federal Tax Table to see what amount of tax you owe:
State Income Tax – for Pennsylvania, all citizens pay a flat 3% tax
Local Income Tax – these rates vary based on where you live.
Norristown Borough - 2.1%
Whitemarsh Township - 1.25%
East Norriton, West Norriton, Bridgeport, Conshohocken, West Conshohocken, Plymouth - 1%
Lower Merion, Upper Merion, Narberth - 0%
At each level of government, taxes are spent on government, worker salaries, law enforcement and public safety (military), prisons, job and family security, transportation, and education. The White House used to publish your Federal Taxpayer Receipt which tells you what your federal tax dollars are spent on.
How Does the Government Figure Out How Much Tax I Pay?
Employers are required by law to withhold income tax from your paycheck and deposit it in a Federal Reserve Bank. When you get a new job, one of the first things you will do is fill out a W-4 Form. Based on the numbers you put on this form (your personal allowances), it tells the employer how much money they should withhold from your paycheck to cover your taxes. Regardless of whether you claim "0" or "1", your amount of taxes is the same, the different is when you pay them:
Claiming "0" = Less Now, More Later
The maximum amount of tax is withheld, so you will get a little bit less each paycheck.
When it comes time to file your tax return you will receive a refund larger than if you claimed "1".
Claiming "1" = More Now, Less Later
Your employer will deduct what one person would pay in taxes, you will get a little bit more in your paycheck than if you claimed "0".
When it comes time to file your tax return you will receive a refund smaller than if you claimed "0".
At the end of the year, your employer will give you a W-2 Form. This form shows how much money you made for the previous year and how much money was taken out (withheld) for taxes and other deductions. You will receive four copies of your W-2 form. One copy is for your records and you will send the others with your federal, local, and state taxes. Your employer must give you this form by January 31st.
OASDI is the acronym for Old Age, Survivors and Disability Insurance program otherwise known as Social Security. This is a program in which the government provides money to people who are unable to work because they are old, disabled, or unemployed. Your employer normally withholds Social Security tax at the rate of approximately 6.2% of your earnings. This is your own contribution toward the cost of Social Security, and your employer matches your contribution out of its own funds.
Medicare is health insurance for people age 65 or older, or under age 65 with certain disabilities. The Medicare tax rate is approximately 1.45% of all your earnings.