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Taxes and Your Paycheck for Financial Literacy

Learn about payroll, income, and social insurance taxes, including FICA, Social Security, and Medicare. Discover how withholding affects your gross and net income. Get insights on Form W-4, allowances, tax forms like 1040EZ, W-2, and 1099-INT.

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Taxes and Your Paycheck for Financial Literacy

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  1. CHAPTER 5 Taxes and Your Paycheck

  2. NOTES The Gov’t receives most of its revenue from? • Payroll taxes: taxes based on employee’s earnings • Income taxes: taxes you pay on your income • More you make, the more you pay • Social insurance taxes: taxes you pay to support social programs • FICA: Federal Insurance Contribution Act • Social security • Medicare • IRS: Internal Revenue Service Collects income taxes

  3. NOTES Paycheck Stub • Withholding: Boss subtracts money from your paycheck for your taxes • Gross income: Pay before taxes are taken out • Net income: Pay after withholdings are taken out from your gross pay

  4. NOTES • Form W-4: A form that provides your boss information on your tax withholdings • Allowances: Number that reduces the amount of money withheld from your pay • 0 (most withheld) pay more each pay check • 1 (middle) • 2 (least withheld) pay more at end of year

  5. NOTES • 1040EZ: tax return form to determine if you will owe or receive a refund (by April 15th) • W-2: sent by employer to you and IRS to report income and taxes (by Jan 31) • 1099-INT: sent by bank to you and IRS to report interest (by Jan 31)

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