For young adults, income taxes can feel a lot like that dream where you’re given a test you haven’t studied for—only the test is your federal duty and the dream is real life.
When teens get their first job, they won’t accurately budget their income if they haven’t considered income tax. If young adults don’t understand the difference between gross and net pay, it’s both confusing and upsetting. While we can’t do anything about how much is withheld, we can help soften the blow by prepping teens for the ins and outs of paying income taxes.
All of the terms and numbers on a paystub can be head-scratchers for someone just entering the workforce. We start by showing students exactly what to expect when they receive their first paystub, and we define the terms and amounts they’ll see.
From federal taxes to social security, we label each type of withholding and explain exactly where it’s going, so teens gain a better understanding of what their paystub means. We also cover optional withholdings that some young adults might see, like health insurance and retirement options. Players also get the chance to consider what retirement options mean for each individual paycheck, their annual income taxes, and their future financial footings.
Come tax time, we also help students understand what their taxable income means for their bottom line, and even how exemptions can affect their net income. Prepping taxes is no walk in the park, so we give players the chance to decide between hiring an accountant or doing taxes using DIY software. As always, both options have trade-offs and can have surprising consequences throughout the game.
No one likes paying taxes, but understanding where all that money is going can help soothe the sting of those paystub withholdings. Demystifying income taxes means better budgeting and helps make tax time a little less scary.