Why do we pay 10% of our paycheck to the government for taxes, and why/under what circumstances do we get it back in tax returns, or have to pay more in tax returns?
In: Economics
Depending on your income level, you have to pay some percentage of that income in taxes. If you work for a company with an accounting department, this percentage is estimated by them and is deducted from your paychecks and sent to the government.
Then, when you do your taxes, you actually calculate the amount due. If the amount due is less than the amount estimated by your employer, then the difference will be sent back in a tax return check. If the amount is greater, then you have to attach the difference to your tax return.
Whether you pay or get paid when you do your taxes is entirely dependent on how good of an estimation your employer makes.
If you are self employed, you have to do all of the accounting yourself, or hire an external accountant.
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