Understanding taxes and your paycheck
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BUILDING BLOCKS STUDENT WORKSHEET
Understanding taxes and your paycheck
When you get your paycheck, you might ask, "Where did all my money go?" Understanding why and how taxes and other items are deducted from a worker's paycheck is an important step toward gaining financial knowledge.
Instructions
Determine whether each statement below is true or false. Provide an example or explanation with each answer
? If you're not sure, you can research the answers using the following resources: ? The Federal Trade Commission's webpage on paychecks: ? Review all three tabs: "What it is," "What to know," and "What to do."
? The "Taxes: Understanding the basics" handout.
Answer the reflection question.
REMEMBER
People who are self-employed, such as entrepreneurs or ride-share drivers, also have to pay taxes, but those taxes aren't withheld from their earnings. They have to pay taxes on their own.
True or false?
1. People often confuse a paycheck and a pay stub. A pay stub is what you use to get your money.
True (T)
False (F)
Example or explanation for your choice
EARN
BUILDING BLOCKS STUDENT WORKSHEET Understanding taxes and your paycheck
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Fall 2022
2. People often confuse gross income and net income. Net income is what you
actually receive after deductions.
True (T)
False (F)
Example or explanation for your choice
3. FICA is another name for Federal Income Tax.
True (T)
False (F)
Example or explanation for your choice
4. Federal law requires employers to deduct money for federal income taxes and payroll (FICA) taxes (Social Security and Medicare taxes).
True (T)
False (F)
Example or explanation for your choice
5. Your withholdings selections allow you to choose how much money your employer takes out of your paycheck for income taxes.
True (T)
False (F)
Example or explanation for your choice
6. Sales taxes are deducted from your paycheck.
True (T)
False (F)
Example or explanation for your choice
BUILDING BLOCKS STUDENT WORKSHEET Understanding taxes and your paycheck
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Fall 2022
7. Reflection question
In addition to taxes, what are some other items that often are deducted from paychecks?
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Fall 2022
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