Taxes 101

A tax is money you're legally required to pay to the government — federal, state, or local. The government uses that money to pay for things like roads, schools, police, the military, parks, and programs like Social Security and Medicare.

If you earn money, buy stuff, or own property, you're almost always paying some kind of tax — sometimes without even noticing.

• Income tax
  A cut of the money you earn from a job, side gig, or business. The federal government takes some, and most states do too.
• Payroll tax (FICA)
  Automatically taken out of your paycheck for Social Security and Medicare — about 7.65% of your pay. Your employer pays the same amount on top.
• Sales tax
  Added to the price when you buy stuff at a store. Varies by state and city.
• Property tax
  Paid yearly if you own a home or land. Usually goes to your local schools and city.
• Self-employment tax
  If you work for yourself (side gigs, freelance, 1099), you pay both the worker and employer side of payroll tax — about 15.3% — plus normal income tax.
• Capital gains tax
  A tax on profit when you sell something for more than you paid (stocks, crypto, a house).

1. Gather your paperwork. W-2 from each job, 1099s for side gigs or freelance work, and receipts for anything you might deduct (school, donations, business expenses).
2. Pick how you'll file. Free tools like IRS Free File, or paid software like TurboTax, H&R Block, FreeTaxUSA, or Cash App Taxes. If your situation is complicated, hire a CPA.
3. Enter your income and deductions. The software walks you through questions — you type in the numbers from your forms.
4. See if you owe or get a refund. If too much was taken out of your paychecks, you get money back. If not enough was, you owe.
5. File before the deadline. Federal taxes are due around April 15 each year. You can request an extension to file, but you still have to pay what you owe by April 15.
6. Pay what you owe. Use IRS Direct Pay, a bank transfer, debit/credit card, or set up a payment plan if you can't pay all at once.

Nobody is taking taxes out of that money for you. A safe rule of thumb: set aside ~25–30% of every side-gig payment in a separate savings account so you have it ready at tax time.

If you'll owe more than $1,000 for the year, the IRS wants you to pay quarterly estimated taxes (April, June, September, January) instead of waiting until April.

• Keep records for at least 3 years in case you get audited.
• File even if you can't pay — the penalty for not filing is way bigger than not paying.
• Lots of people qualify for free filing. Check IRS Free File first.
• Big life events (new job, baby, marriage, buying a house) change your taxes — update your W-4 at work.