Your employer will give you a Form W-2 statement in January that shows the tax that you paid in the previous year. This statement helps you prepare your annual federal, state, and local income tax returns.
For more information on Form W-2, visit http://www.irs.gov/faqs/display/0,,i1%3D54%26genericId%3D15895,00.html.
When the tax return deadline approaches on April 15 of each year, people prepare their tax returns in the hope of receiving a tax refund from the government. In some instances, people owe the government money because not enough money was deducted from their paychecks for taxes.
The tax withholdings from your paycheck are calculated through the information you enter on your
Form W-4, which is filed with your employer. Form W-4 helps you estimate your tax deductions.
In general, the more exemptions that you claim on Form W-4, the less tax is deducted from each paycheck. When you have fewer taxes deducted, you may
owe money to the government if your estimation was not accurate.
On the other hand, if you have more money deducted from your paycheck than necessary, you overpay your taxes. The government is then holding money that you could use in other ways, such as building your savings.
To calculate the right withholdings from your paycheck and get a better understanding of what information is needed on the Form W-4, download the form for the current year at: http://www.irs.gov/pub/irs-fill/fw4_02.pdf.
For more information about Taxes, visit the Paycheck Deductions or Tax Funded Programs sections of this activity.