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Financial Tip

One of the best ways to stay on track to financial independence is to have a spending plan. Here's a quick overview of the steps you can take to set up your own:

1. Gather documents and receipts showing earnings and expenses.
2. Total your net monthly earnings. 
3. Total monthly expenses, including money you put into your savings. 
4. Subtract monthly expenses from earnings.
5. Rework your spending plan until it comes out on the plus side - including setting aside money on a regular basis for your long-term goals.
6. Invest in yourself by reviewing and adjusting the plan each month so you can stay on track to reach your long-term financial goals.

The Role of the IRS

The Internal Revenue Service (IRS) is a bureau of the Department of the Treasury, within the United States Federal Government. The IRS is responsible for collecting taxes and enforcing of the Internal Revenue Code. Its role is to help the large majority of compliant tax payers with the tax law and make certain those who challenge the law still pay their fair share.

The IRS, in some form or another, has been around a long time. In July, 1862, during the Civil War, President Abraham Lincoln and Congress created the original office of Commissioner of Internal Revenue. At the same time, the Revenue Act of 1862 was passed as an emergency and temporary war-time tax to pay for war expenses.

Over the years, the amount of taxes people paid was often driven by the needs of the country. For example, in 1918, during World War I, the top income tax rate rose to 77 percent. These funds were used mostly to help finance the war effort. It dropped sharply in the post-war years, and then rose again during the Depression.

During World War II, Congress introduced payroll withholding and quarterly tax payments as a means to expedite the process of collecting taxes.

In fiscal year 2010, the IRS collected more than $2.3 trillion in revenue and processed more than 230 million tax returns. As a model of efficiency, the IRS spent just 53 cents for each $100 it collected.

What are taxes? Taxes are payments of money to the government that provide public goods and services for the community. Some examples of public goods are parks, street lights, and roads and highways. Public services include welfare programs, sanitation, law enforcement and education.

Annually, "Tax Day", unless it's a weekend or holiday, falls on April 15. This is the day which individual tax returns are due to the federal government and to most state governments.

Learn about the IRS by visiting its website
Under the Individuals tab, there is a Students link. In partnership with education professionals, the IRS has created an Understanding Taxes site that offers an interactive tax education program for high school and community college classrooms. The Understanding Taxes activities are geared toward helping students understand the factors that impact the taxes they will pay.

In addition, lesson 1.5 of the Yes, You Can curriculum, provides activities that help students make the connection between their earnings and the taxes they pay.

Resources from both the IRS and Yes, You Can are available at no-charge.

Teachable Moments

If your teen has a job, spend time together looking at their paycheck. Look at the total income they earned, then identify the amount withheld for federal income taxes, social security taxes and state and local income taxes (Not all states or localities charge this). Help your teens understand the kinds of services you and your family receive as a result of the money that is withheld from their paycheck.