The debate about taxes is always a hot topic, and it seems to be even more contentious these days.
But one question that doesn’t get as much attention is whether or not federal employees pay taxes.
Do they? And if so, how does that work? Well, let’s take a closer look at the issue and find out.
- 1 Do Federal Workers Pay Taxes?
- 2 Do Federal Workers Pay Social Security Taxes?
- 3 Do Federal Employees Pay Less Taxes?
- 4 Do State Employees Pay Taxes?
- 5 Are Federal Employees Taxed Differently?
- 6 Tax Withholding Requirements for Government Workers
- 7 What Benefits Do you Get as a Federal Employee? Are these Benefits Taxable?
- 8 Final Thoughts
Do Federal Workers Pay Taxes?
Yes, federal employees Pay Taxes. In fact, all United States citizens are required to pay taxes(If their Income Qualify), regardless of their occupation.
However, certain allowances and benefits such as Health insurance, Retirement plans, Flexible spending accounts and other employee benefits(Perks) received by Government employees are not taxable.
This includes the President and Vice President, who both pay federal income tax, as well as Social Security and Medicare taxes.
Federal employees also pay state and local taxes, just like everyone else. The amount of tax that a person pays is based on their income, so Government employees who earn a higher salary will pay more in taxes than those who earn a lower salary.
However, everyone who pays federal income tax helps to support the government and the various services that it provides. Without Federal tax revenue, the government would not be able to function.
Do Federal Workers Pay Social Security Taxes?
Yes. All federal employees that were hired in the year 1984 or later years are required to pay Social Security taxes just like all other people.
Whether you work in Washington DC or San Francisco, all Government Workers pay Social Security Taxes.
Do Federal Employees Pay Less Taxes?
Federal Government Employees pay Same Income Taxes as Private Sector.
Income tax rates are the same for all US residents whether they work for Government or in Private Industry. Taxes are based on Tax Brackets and Deductions and not based on where you work.
Do State Employees Pay Taxes?
Yes, State employees pay taxes just like private sector. In fact, all US citizens are required to pay income taxes, regardless of their occupation.
This includes the State Governor, who both pay federal income tax, as well as Social Security and Medicare taxes(if Applicable in the state).
State employees also pay state and local taxes, just like everyone else.
The amount of tax that a person pays is based on their income, so State employees who earn a higher salary will pay more in taxes than those who earn a lower salary.
However, everyone who pays federal taxes helps to support the US government and the various important services that it provides.
Without income tax revenue, the federal government would not be able to function.
Are Federal Employees Taxed Differently?
Tax Withholding Requirements for Government Workers
If you are an employee in a Federal or State Government, your government entity is responsible for properly withholding applicable, Federal Income Tax, State Income Tax, Payroll Taxes and Local taxes per government requirements.
Government entity is also responsible for issuing Paychecks that reflect accurate tax withholding as well as issue yearly W2 forms.
For more information check out IRS Resource for Government Workers Witholding.
What Benefits Do you Get as a Federal Employee? Are these Benefits Taxable?
You get dozens of tax benefits(Listed Below). These benefits are not subject to income taxes and provided the all the federal employees on Pre Tax Basis.
Here is a list of typical benefits provided to the Government Employees.
- Health Insurance for Employees and Their Family Members
- Child and Dependent Care for Employees/Parents with Young Children.
- FSA as known as Flexible Spending Accounts
- Pension Plans
- Thrift Savings Plan
- Social Security Match
- Tax Free Life Insurance up to $50,000
- Various Employee Assistance Programs
- Discount at various vendors such as Cell Phone Vendors T Mobile(Metro PCS), Verizon Wireless, Sprint, and AT&T
So We learned that Per Internal Revenue Service Tax Code & Regulations, All Government Employees are required to pay taxes whether they work for federal or state government.
Government employees salaries are subject to withholding for income tax, Social Security, and Medicare taxes just like any other employee’s salary.
However, certain allowances and benefits received by federal employees are not taxable.
To learn more about the specific tax exemptions available to employees and self employed, continue reading our tax blog.