How Much Do You Know About Taxes?

There is a saying that there are only two certainties in life: death and taxes. Governments collect taxes to keep our country moving forward. Taxes are collected in several ways: from federal income tax  (IRS Form W-4), inheritance tax, sales tax, and many other taxes. Employers pay a variety of taxes, including the FUTA (Federal Unemployment Tax Act) tax, which is a payroll tax on the earnings paid to employees.

In the United States, each age group, from newborns through to the elderly and have different needs, including health insurance, education, training, housing . People who have worked and reached the age of 65 get special dispensation from the government in the form of Social Security and health care (Medicare). The government pays for this through the FICA (Federal Insurance Contributions Act) tax, which is also taken out of workers’ paychecks.

Taxes occur at both the state and federal levels and includes sales tax, which varies from state to state and, in some instances, county to county. A quick way to calculate sales tax on each purchase is to take the cost of the item  and multiply it by the percentage of the tax. So if the item costs $100 and the sales tax is 6 percent, you will pay $6 tax ($100 x 0.06 [6 percent] = $6).

There are instances when tax is not charged, such as when people earn less than certain thresholds. Also, child support is not taxable. But be aware that if you win the lottery or a car as a prize, you’re obligated to pay tax on the value of your winnings. Prizes are attributable to luck, not skill, and therefore taxable.

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