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  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

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 Disability  Retirement Retirement  Medicare Medicare  Unemployment Unemployment  Worker’s Comp Worker’s Comp 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