Introduction – Why Taxes Matter and How the System Works

Taxes fund essential services like roads, schools, healthcare, and national defense. In the U.S., you report your income, calculate what you owe, and pay either through paycheck withholding or directly to the IRS and your state. The money is then used to run government programs and keep public services operating.

1. Federal vs. State Taxes – Basic Differences

Federal Taxes – Collected by the IRS, same rules nationwide, fund programs like Social Security, Medicare, and defense.

State Taxes – Vary by state; some have no income tax. Used for state programs like universities, local roads, and public safety.

Bottom line: Federal taxes are uniform; state taxes depend on where you live.