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
You are paying an estimation of your end-of-year tax owing throughout the year on each paycheck.
At the end of the year, you calculate your actual tax burden, based on your total income, and your total deductions. You then compare that to what you actually paid in taxes over the year, and evaluate whether or not you need to pay more, or if you get money back.
Without taking money off of every paycheck, a lot of people would mismanage their funds and not save enough to pay their taxes at the end of the year.
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