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Christmas is a time of unending generosity. Don’t you agree?
Because of that, it is the perfect time to talk about taxes.
Why should we talk about taxes in homeschool during the holidays? Isn’t it a better time to talk about Santa? Candy Canes? Reindeer? Talk about all those things, too. Let’s face it. Kids do almost nothing but talk. Even when they play (that’s normal development).
But during school and math, talk about taxes, too. Kids don’t realize that we have to pay part of our income, part of every sale, to the government to support things like roads, parks, schools, and much more to keep our country working.
I see taxes as a gift we give to our society. We are paying to make our society better, to build and maintain things that make our lives easier and more joyful, and to help those who are less fortunate than us. Isn’t that what Christmas is all about?
So what should we teach our kids about taxes?
Given that most of us have learned about taxes through the act of paying them, it can be confusing and overwhelming to talk to our kids about taxes because we don’t really have a cohesive idea of what taxes actually are. Below is sort of a primer on taxes to guide you in teaching your kids about taxes.
Most of what I have outlined below is common knowledge and can be taught through example (showing sales tax on grocery receipts or past tax returns) or discussion. I have also made a quick worksheet for those who want to check understanding. Use the form below to sign up and receive your free worksheet by email.
Why Should We Pay Taxes
Taxes are our way of caring for shared things in our society like roads and parks. Like I mentioned before, I also see taxes as a gift we give those in our society who cannot completely care for themselves.
Paying your taxes are a mark of good character, meeting your responsibility to yourself and those less fortunate. It means you are honest and takes generosity to pay without resentment.
They benefit you and those around you.
First, our taxes go to pay for the things and people that we need and use every day.
Public school teachers are paid with taxes. While this doesn’t directly benefit homeschoolers, our entire society benefits from public schools.
Police officers, emergency phone operators, and firefighters are paid with taxes.
Public parks are built and maintained with taxes.
Roads are built and maintained by taxes.
The government also distributes tax revenue to support things like hospitals and medical research, programs that protect the environment, small business support programs, and agricultural programs.
The state and federal governments use tax revenue to fund programs that guarantees health insurance and funds to buy food for low-income families and the elderly. Some places also have programs that run housing and utility assistance programs to help people pay for a place for a decent place to live and to make sure they get heat in the winter.
Each person who works is also required to pay into a Social Security fund. This “tax” actually doesn’t go into an account that is shared into a group. Each individual’s social security is recorded and goes to paying their own Social Security retirement.
The only caveat to this is for individuals who are especially sick or have disabilities, who get benefits because they cannot work.
I have taken the liberty to compile some resources for you to learn about Social Security.
To download a free toolkit for teaching Social Security to high schoolers, click here.
To learn more about how Social Security works, click here.
To create a free account to estimate your future benefits based on your actual earnings, click here.
Each level of government taxes you.
Your local government charges taxes, in purchases/sales tax, property taxes, and real estate taxes. These funds are used to run local government and pay for local parks, city maintence, and to pay local government officials. At this level, citizens often have the right to vote in new taxes. For example, local governments may let the citizens vote to raise sale taxes to benefits schools.
Your state government collects payroll taxes, income taxes, and sales taxes to pay for state level programs and officials.
The federal government taxes us to pay for national programs, our legislators and other goverment officials, and things like national parks.
What Kind of Taxes Exist
The most common tax is the sales tax. Local and state governments levy these are purchases made within their state. Actual taxes vary buy location. For instance, my municpality charges a “fresh meat” tax on any sales of meat or food that contains meat, like a McDonald’s burger. Check with your City Hall to find out which taxes are collected in your town.
Not all sales are subject to sales tax. Second hand clothing and events like yard sales don’t ususally collect sales tax.
Property taxes are taxes collected on real estate and property worth a certain amount (varies by location) that the local/state governments collect.
Income taxes are collected by states and federal governments once a year.
When Do You Pay Taxes
Sales taxes are included in the price of every transaction you make. You can look at your reciept and find a separate tabulation for the amount of taxes you pay for that transaction.
Income and property taxes are due once a year, the year following the earnings. So you would pay 2018 income taxes in 2019. In America, income taxes for the previous year are due by April 15th. Property tax due dates vary by location. Check with your local county assessor for due dates.
How Do You Pay Taxes
Businesses are responsible for calculating and charging you sales tax at the time of the purchase. Large purchases, for things like vehicles or homes, have their own rules. Where I live you have 30 days after the purchase of a vehicle to pay sales tax at the DMV when you register your vehicle.
Income taxes are complicated. First, most jobs will have you fill out a W-4 form on the first day of your job. It will detail how much the employer will withhold to pay your taxes throughout the year. This means that a small amount will be withheld from each check you are paid. Some of this will go to pay your Social Security, too.
At the end of the year, each employ is issued an 1040 form, which states exactly how much you made that year.
1040 forms are most commonly used by a tax professional to calculate how much you owe to the government. These are people who have been to school to learn about the legal language used in to tax forms, what things qualify for dedcutions, and what exactly we need to pay based on our income and the Tax Code. The Tax Code is the official rulebook that states and the federal government uses to calculate how much each individual owes in taxes.
The professional will input the information into another form on the computer, ask you about deductions, and the calculate what you owe. Many people especially with children, actually get a refund, meaning they paid in too much over the course of the year through their checks.
It works differently for self employed people. Contact a tax professional for questions because each business it quite different, and it can get complicated.
What Kinds of Things Qualify for Deductions
This varies based on what the business is, but often everything from business food and travel expenses to child care to education expenses to medical bills can be deducted. The Tax Code is so complicated, and differs in every state, so contact a tax professional to answer specific questions.
Taxes are often seen as a way the government steals from the common man, but we need to think of taxes as a great gift we give to society and ourselves, and a great way to serve our fellow man in the meantime. Let’s teach our kids to be responsible citizens who are eager to do their part.