Learn how taxes work through an easy-to-understand explanation for children. Explore how a toy store employee's earnings are impacted by Federal and State Income Taxes, with practical examples to grasp the concept.
Imagine you work at a fun store that sells handmade wooden toys. Let's say you earned $860 this week for working hard. But guess what? The government asks for some of that money to help run the country, just like how you save some of your pocket money for a rainy day.
First, the Federal government wants 14% of your earnings for Federal Income Tax. That's like sharing 14 out of every 100 dollars you earned with them. So, if you earned $100, that means you need to give them $14.
Next, your State government wants 3% of your earnings for State Income Tax. So, out of every 100 dollars you made, they want 3 dollars to support the State.
Now, let's see how much money you'll have left after paying both taxes. To figure this out, we subtract the total tax amount (14% + 3%) from your total earnings. First, find out how much you need to pay for Federal Tax (14% of $860 = $120.40) and State Tax (3% of $860 = $25.80).
Finally, you subtract these tax amounts from your initial earnings: $860 - $120.40 (Federal Tax) - $25.80 (State Tax) = $713.80. So, after paying both taxes, you'll have $713.80 left in your pocket to spend or save!