After you begin your first job, you will receive your first hard-earned paycheck.  Your paycheck may be much less than what you were expecting. Where did the rest of your money go?

The answer, of course, is income taxes. Several types of taxes are withheld from each paycheck you receive.  Some of these taxes include  federal taxes (IRS), state taxes (ODT), and local taxes such as cities or school districts.

Let's take a look at a sample paystub.

The sample paystub shows a variety of different taxes that have been withheld from this paycheck.  Depending on your employer, you may also have additional money withheld for medical insurance or retirement benefits. Withholding amounts are determined by completing the Federal Form W-4 and Form IT-4 for the State of Ohio. These taxes and other monies collected allow the government to pay its employees and provide services to our communities.  Some of these services will be familiar to you.  The fire department, the police department, local parks and recreation centers, public libraries - all of these services are provided free because we all pay taxes on our income.

Form IT-4 and W-4 Explained

At the end of each year, your employer will send you a W-2 form.  The W-2 will contain all wages, taxes and other deductions for the past year.  You will use the W-2 to file your annual tax return. For more information on W-2s and an example of a W-2, visit Filing My Ohio Income Tax Return. There you can find an example and explanation of a W-2 form.

You may also have a part-time job babysitting or mowing your neighbors’ lawns. These services may be taxable in some instances but in many situations they are not taxable. For instance, mowing lawns is only taxable if your gross sales are more than $5,000 in a single year. Babysitting and many child care services are non-taxable. For more information check under the Young Entrepreneurs section of this site.