1. Tax Basics Tax Money collected by a government from its citizens to operate the government Gross pay The total amount of money you earn Net Pay The amount of money you take home on your paycheck

2. Payroll Taxes Payroll Taxes Taxes on your paycheck These include: Federal and state income taxes Social security (FICA)—retirement and disability Medicare—health care for elderly

3. Sales Tax Sales tax Tax on purchases at a store Merchant collects this money and sends it to the government The federal government does not impose a sales tax Many state and local governments do impose a sales tax

4. Property Tax Governments calculate property tax based on the value of the property The government sends the property owner a bill for this tax Primarily used to fund local programs (schools, roads, etc.)

5. The Internal Revenue Service Internal revenue service (IRS) The government department that enforces the federal tax laws and collects taxes File a federal tax return with the IRS every year

6. The Internal Revenue Service Tax return A report to the IRS of all the infor- mation about your income and taxes This is a form called 1040 or 1040EZ You report how much income you earned and how much you’ve paid to the IRS You will either receive a refund or pay the difference to the U.S. Treasury

7. The Internal Revenue Service Taxes are figured based on your earnings from January to December When the year is over, you have until April 15 th to file your return

8. W-2