What Factors Affect Taxes on Minimum Wage?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 December 2019
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Taxes on minimum wage may be impacted by a number of factors, including the actual annual income of those who are working in positions that pay no more than the current minimum wage. In many nations, the tax tables prepared for local, state, and national taxation will include provisions that are designed to reduce the tax burden of those who currently earn under a certain amount. While taxes are still assessed and the amounts withheld by employers and forwarded to the appropriate tax agencies, there is a good change that employees who make a minimum hourly wage will be able to recoup a significant amount of those collected taxes by filing annual tax returns.


Depending on the amount of income that is actually generated, employees may not actually owe taxes on minimum wage earnings. In many nations, tax laws set a minimum amount of annual earnings that must be generated in order to actually owe taxes to a state or national tax agency. Someone who is working at a minimum wage job not actually make enough money to be required to file a tax return. While not required, it is usually in the best interests of the employee to file a return, as this can be the mechanism for being able to receive the collected taxes on minimum wage pay that was withheld by the employer during the tax year. In this scenario, there is a good chance that the employee will be able to receive a full refund of all those taxes.

The impact of taxes on minimum wage earners can also sometimes be reduced if the employee qualifies for certain tax credits currently available. Many nations provide these types of credits as a means of aiding minimum wage earners with the chance to enjoy a better standard of living, often making it possible to offset the taxes on earnings by offering credits for such expenses as child care. Even if the employee who works for the current minimum wage does make enough money to be required to file a tax return for a given tax year, the ability to claim certain credits will often mean a chance to recoup most if not all of the taxes withheld during the year.

Since tax laws vary from one country to the next, any number of factors may impact taxes on minimum wage earners. Understanding those laws as well as any tax breaks or exclusions that are legally provided is important for anyone working a minimum wage job, since doing so makes it possible to claim those benefits and receive a return of the employee taxes withheld by employers. Many tax agencies provide assistance to taxpayers who need help in identifying and qualifying for those breaks and deductions, typically at no charge to the taxpayers.


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