Taxes are part of every working person’s paycheck — including the many teenagers who work part-time jobs during the school year and the summer.
Understand the relationship between working and taxes
Recognize key terms related to income tax
Taxes are required money payments to governments, which use the funds to provide public goods and services to benefit the community. Common types of taxes include income, payroll, sales, and property taxes. Income and payroll taxes are both connected to how much you earn. Understanding taxes can be an essential step toward growing knowledge and skills related to financial life.
Payroll taxes include Social Security and Medicare taxes. Social Security taxes provide benefits for retired workers, people with disabilities, and the dependents of both. Medicare taxes provide medical benefits for people who are 65 or older, certain younger people with disabilities, and people with permanent kidney failure requiring dialysis or a transplant. (Social Security and Medicare taxes are referred to as FICA on your paystub. FICA stands for Federal Insurance Contributions Act, the law authorizing the payroll tax for Social Security and Medicare.) Federal income taxes are used to pay for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt.
Income tax: Federal, state, and local taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Includes both personal and business or corporate income taxes. Not all states and localities have income taxes.
Payroll tax: Taxes taken from your paycheck, including Social Security and Medicare taxes.
Tax credit: A dollar-for-dollar reduction in a tax. It can be deducted directly from taxes owed. Tax credits can reduce the amount of tax you owe or increase your tax refund, and some credits may result in a refund even if you don’t owe any tax.
Tax deduction: An amount (often a personal or business expense) that reduces income subject to tax.
Tax refund: Money owed to taxpayers when their total tax payments are greater than the total tax. Refunds are received from the government.
Taxes: Required payments of money to governments, which use the funds to provide public goods and services for the benefit of the community as a whole.
Read the Handout
Taxes: Understanding the Basics
Taxes Understanding the Basics
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Complete the Worksheet
Jobs, Teens, and Taxes Worksheet
Jobs Teens and Taxes Worksheet
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Download PDF • 123KB
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