Federal Income Tax

The thing you complain about every April. Even when you end up with a refund, you end up thinking “I did all this paperwork to get my own money back?”

Essentially, the federal government levies a tax on your earnings. Most states also have income taxes (though the federal one is generally a lot bigger). If you receive a standard paycheck, the taxes are collected as you go. Your company (or their payroll processor, acting on their behalf) takes an estimated amount of income tax out of your pay and sends it to the government.

Then, after the year is completed, you run the numbers and see if you paid the right amount of tax, based on the amount of earnings you had and what deductions you racked up over the year.

The paperwork you file related to this process is called your tax return.

If too much of your paycheck went to the government during the year, you get a refund. The government sends you a check for the extra (or directly deposits it in your account, if you prefer). If you didn't pay enough out of your paycheck during the year, then you have to make up the difference. You'll need to send some money to the the Treasury Department.

Some fun facts: the first income taxes in the U.S. were passed to pay for the Civil War, and initially only affected really rich people. The Supreme Court eventually ruled federal income taxes unconstitutional, so regular people actively pushed for and voted for a constitutional amendment in order to purposely, explicitly allow the government in Washington to be able to tax income.

That was the 16th amendment, if you’re counting. So, thank great-great grandpa (great-great grandma couldn’t vote at that point) every time you fill out a W-4.