How taxes work
The federal government, most state governments, and some local governments tax the income you earn for work you do. In most cases, they also tax at least some of your income from investments you make.
To ensure that these governments have a steady stream of taxpayer income, your employer is required to withhold, or keep back, part of your gross pay each pay period and forward the federal portion to the Internal Revenue Service (IRS) and the state and local portions to the appropriate state or local agency. What it means for you is that your net pay, sometimes called your take-home pay, is less than what you earn.
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