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As the saying goes, nothing in life is certain except for death and taxes. And every year when you file your tax returns, you may be scratching your head, thinking “Where the heck does the money go?”
Cardi B wants to know, too. Last year the superstar rapper, on an Instagram video that went viral, asked, “So you know the government is taking 40% of my taxes. And Uncle Sam, I want to know what you’re doing with my… tax money.”
This is a great question, and the answer: It’s complicated. To keep things simple, here are some figures from an article at The Hill: The federal government spent $33,054 per household and collected $26,198 in taxes. What’s the budget deficit? We’re talking $6,856 per household.
Based on this $33,054 household amount, here’s where the money went:
Social Security/Medicare: $12,401. This comes out of your paycheck, and the 15.3 percent for Social Security and Medicare is divided evenly between you and your employer. Note: If you’re self-employed, you’re responsible for the entire 15.3 percent.
Anti-Poverty Programs: $6,112. This comprises assistance programs to help the less fortunate, like aid for low-income families. Some of these programs include Medicaid, Temporary Assistance for Needy Families (TANF), food stamps, housing subsidies, child care subsidies, Supplemental Security Income (SSI) and low-income tax credits.
Defense: $5,046. This is everything from military paychecks, operations in the Middle East, and the R&D and acquisition of new technologies and equipment.
Interest on the National Debt: $2,434. Just like how you pay interest fees on credit cards, mortgages and car loans, our government pays interest on the national deficit.
Veteran’s Benefits: $1,390. This includes income and health benefits provided to our veterans.
Federal Employee Retirement Benefits: $1,098. This goes toward retirement benefits for federal employees.
Justice Administration: $546. This is earmarked toward law-enforcement grant programs, and paying for federal attorneys and prisons.
Education: $536. While the majority of education spending comes from a city and state level, nine percent of K-12 education spending comes from the federal government. Where does the money go exactly? The lion’s share goes to low-income school districts, college student financial aid, and special education.
Health Research and Regulation: $533. This goes toward dozens of grant programs for health providers, as well as the National Institute of Health (NIH), Centers for Disease Control (CDC), and the Food and Drug Administration (FDA).
Highways and Mass Transit: $487. This is funded primarily by the 18.4 cent per gallon tax you pay on gas.
International Affairs: $371. This includes contributions to the UN, operation of American embassies abroad, and economic and military assistance to other countries.
Disaster Relief: $338. This amount provided assistance and relief to hurricanes and natural disasters.
Miscellaneous: $1,761. If you’ve been crunching the numbers, you might have noticed that there’s $1,761 still left to be spent. This remainder is distributed to federal programs that aren’t listed, such as unemployment benefits, social services, natural resources, farm subsidies, and space exploration.
Tax Filing Tips
Now that you have a basic idea of where the money paid from your federal taxes goes, how can you best prepare to file your tax return in 2019? Take a look at some of these tips:
Get Started Early. With all the changes from the Tax Cuts and Jobs Act and this historic, epic government shutdown, filing a return for the 2019 tax year might be a tad more complicated than in previous years. So, it’s important to get a jump on tax prepping as soon as you can.
If you’re going the DIY route, and using software to file on your own, gather all the required documents to file your taxes – starting with your wage and income statements (i.e. W-2s and 1099s). Have your receipts or credit card statements handy in case you need to include deductions. You can even try tracking some of your spending using a money management app.
If you’re working with a tax pro, ask her what documents you’ll need to gather to get the process rolling.
You can file your return as soon as it’s ready and this way you’ll get a refund sooner. And just think: This might be a nice boost to your savings as the average tax refund is $2,895 (this can vary by state.)
Consider Whether You Need an Extension. Need more time to file? You can ask for an extension. It gives you six more months to file, and pushes the deadline from April 15th to October 15th. Remember: Receiving an extension means you have more time to file, but payment for any taxes owed are still due by April 15th.
The More You Know
So there you have it. Both you and Cardi B now have a clear idea as to where those government tax dollars are going. It’s now your turn to file your tax return!
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.