If you’ve ever worked, then you’re aware that the government takes money out of your paycheck. But, where does that money go? Do you get it back? And, who is that FICA guy who’s taking your money anyway? This article will answer these questions and give you the basics on income tax.

What is income tax?
What is FICA?
Where does the money go?
Do you get the money back?

What is income tax?
Income tax is a payment to federal, state and local governments based on individual or company earnings.

Common income taxes include: federal, FICA (Federal Insurance Contributions Act) and state taxes.

What is FICA?
FICA stands for Federal Insurance Contributions Act. This act deducts 7.65 percent of your gross pay for Social Security (6.2 percent) and Medicare (1.45 percent). Your employer pays in an equal amount.

Where does the money go?
Federal—The federal taxes taken out of your income go to generate money for the government, which can be used for healthcare, road construction, disaster relief, military funding, law enforcement and the national debt. By paying money out of your paycheck, you’re helping your community and country.

FICA—The money taken for FICA goes toward Social Security and Medicare. The money taken for FICA is distributed to people who are retired or disabled.

State—State taxes are used to help pay for education, roads, parks and prisons.

Do you get the money back?
Part-time employees usually will get their withholdings back as a refund. Refunds generally depend on how much total income you have made for the year as well as the deductions filed on your income tax form. When you start a job, you are typically required to fill out a W-4 form to indicate how much income tax to withhold from each paycheck.

Income tax forms must be filed by April 15 each year to the IRS. There are many federal and state rules and regulations to follow. Consult a tax-advisor for any questions.

Related Links:
First-Time Filers–Teens and Finance
IRS