I'm Employed
What's Your Taxpayer Type?
Core Tax Concepts for Employees
Withholding Taxes Explained: Your employer automatically deducts taxes from your paycheck, which includes federal income tax, Social Security, and Medicare taxes, as well as any applicable state and local taxes.
Interpreting Your W-2 Form: This crucial document outlines your annual earnings and specifies the exact amount withheld for taxes. It's essential for filing your tax return accurately.
Tax Deductions for Employees: You may be eligible for deductions like contributions to retirement plans (e.g., 401(k)), health insurance premiums if paid pre-tax, and unreimbursed work-related expenses under certain conditions.
Eligibility for Tax Credits: Some employees may qualify for credits like the Earned Income Tax Credit (EITC), which can significantly reduce tax liability and potentially lead to a refund.
Tax Implications of Working in Multiple States: If you work in more than one state, you may need to file tax returns in each state. Generally, your resident state will offer a credit for taxes paid to another state.
Tax Treatment of Employee Benefits: Benefits such as health insurance, employer-provided retirement plans, and stock options have specific tax implications. For example, employer contributions to health insurance are usually not taxed.
Remote Work Tax Consequences: Working from home in a different state from your employer can lead to tax liabilities in both states. It's crucial to understand each state's tax rules.
Taxes on Freelance or Contract Income: If you have side income from freelance or contract work, this income is subject to self-employment tax in addition to income tax, and you may need to make quarterly estimated tax payments.
