Taxes and Social Security

Understanding Taxes Taxes are a form of payment to the government to support government services. There are three types of government Federal Runs the country State Manages its own state Local Counties, cities, and towns

The IRS Internal Revenue Service Collects federal taxes and oversees the federal tax system Website provides all tax forms needed to file taxes Taxes paid to the IRS go into the U.S. Treasury.

Types of Taxes Income Tax Social Security Tax Sales Tax Property Tax

Income Tax Tax you pay on the amount of money you earn. It may be from a job or other source of income such as interest on savings or/and investments. Calculated as a percentage of your total income earned. This is the federal government’s main source of money.

Social Security Tax Tax you pay so that you can receive certain benefits when you retire.

Sales Tax Tax paid when you purchase an item or service. Calculated as a percentage of the price. Goes to the state or local government.

Property Tax Usually paid yearly to the state or local government. Based on the value of property – land or building – owned. The main source of money for local government.

Where do tax dollars go? Education Transportation Safety Health Includes public schools and libraries Transportation Roads, mass transit, ferries, airports, etc. Safety Includes law enforcement and fire protection Health Hospitals, medical research, etc. Military Postal

A program that provides benefits for people of all ages Social Security A program that provides benefits for people of all ages

Social Security Number What is it for? The government uses it to keep track of your contributions and work history. Your employer will need it when you are hired. Required to file taxes.

Types of Benefits Disability Retirement Medicare Unemployment Worker’s Comp

Disability Benefits Paid to someone who cannot work due to a physical or mental condition Based on the worker’s average earnings

Retirement Benefits Paid to workers who retire Higher earnings = Higher benefits Current retirement age is 65

Medicare Pays medical costs for people who are over 65. Covers hospitalization and other medical care.

Unemployment Benefits Provides temporary income to workers who have lost their jobs. To be eligible, you must have worked for a certain length of time and not have lost your job through fault of your own. Funded by taxes both the employer and employee pay.

Worker’s Compensation Paid to workers injured on the job. Also, may be paid to dependents of workers killed on the job. May include medical care and disability