Taxes & Your First Job: What Every Teen Should Know 💼💰

Neeha Kasturi
May 21
3 min read

Getting your first job is a huge milestone. Whether you're working at a café, tutoring students, babysitting, interning, or running your own small business, earning your own money brings a new level of independence. But obviously there is one confusing thing. Taxes

You finally receive you paycheck...and it's smaller than expected 🧠

Where did the rest of your money go? Why is it being deducted? And what is a W-2?

Once you understand ow taxes work, it will be easier to understand the basics.

Why Do We Pay Taxes? 🏦

Taxes are money collected by the government to help pay for public services and programs. The money goes to towards things like:

Roads and Transportation
Schools and Education
Hospitals and emergency services
Parks and public spaces
Social programs
National Defense

So the money that magically disappears, is actually going to help out the country

Gross Pay vs. Net Pay

One of the first things you'll notice on the paycheck is that the amount you earned isn't the same amount you'll receive.

Gross Pay

This is the total amount of money you earned before taxes or deductions

Example:

If you worked 10 hours at $15/hour

Gross pay is is $150

Net Pay

This is the total amount you earned before taxes or deductions are taken out

Example:

Gross pay: $150

Taxes and Deductions:$20

Net pay: $130

Your net pay is the money that goes into your bank account

What gets taken out of your paycheck?

Here are the most common deductions teens may see on a paycheck:

Federal Income Tax: This money goes to the federal government and helps fund national programs and services

State Income Tax: Some states collect state income taxes; of course t depends where you live and how much you earn

Social Security Tax: This helps fund retirement and disability benefits for workers in the future

Medicare Tax: This supports healthcare programs for older adults and certain individuals with disabilities . Firstly, these deductions may seem annoying, but they're a normal part of working

What is the differences of W-2 and W-4?

Well a W-2 and W-4 are both given by the employers

W-2	W-4
Shows how many money you owned	Shows the employer how much federal taxes should be withheld from your paycheck
How much tax was taken out	Filling it out is efficient for know how much to pay for taxes
Important information needed for filling taxes	Important for filling out taxes
You will use this for filing taxes, so it has to be safe	This should also be kept safe

What's is a Tax Refund💸

A tax refund is when the government takes more money from your paycheck than necessary.

Basically the government gives the extra money back as a 'sorry'

This shocks many teens when they are filling out taxes.

Common first Job Mistakes Teens Make

Not Checking the paychecks -Always reviewing the paystub to ensure the hours, pay rate, and deductions are accurate
Spending Every Paycheck Immediately - Getting paid does feel exciting, but saving even a small amount really helps (Spend some, Save some, Invest some)
Ignoring taxes Completely - Even if taxes seem confusing, learning the basics can really give you a major advantage

Tips for Managing Money From Your First Job

Open a Bank Account - Having a savings or checking account makes managing money even easier
Creating a Budget Plan - Income, Spending, Saving Goals
Start Building Savings Early - College Expenses, Emergencies, A car, Future Investments

Learn Credit Early

Understanding taxes, budgeting, and credit together to create a strong foundation and learn financial literacy

joke of the week!