Final answer:
Most employees can no longer claim unreimbursed employee expenses on their tax returns unless they belong to certain specified categories. Withheld taxes cover various federal and state obligations, while hidden unemployment captures those employed in less-than-ideal situations. Some states have no income tax, allowing for potential deductions on federal taxes.
Step-by-step explanation:
The subject in question is about the deductibility of unreimbursed employee expenses on federal income tax returns. As of tax reforms that began in 2018, most employees can no longer claim a deduction for these expenses unless they fall into specific categories, such as qualified performing artists, certain educators, armed forces reservists, and individuals with disabilities who have impairment-related work expenses. These changes imply that the typical employee who incurs costs for things like work clothes, tools, or professional dues that are not reimbursed by their employer will not be able to deduct these expenses from their taxable income.
Taxes withheld from an employee's paycheck include federal income tax, state and local taxes, and contributions to social security and Medicare. Employers also contribute to taxes and insurance programs based on the employee's wages.
Hidden unemployment involves individuals who may be employed part-time or in jobs that do not fully utilize their skills or meet their employment needs, such as a finance degree holder working in a sales clerk position. Though technically employed, these individuals may seek more suitable full-time or permanent employment.
It's also important to note that some states have no income tax, and in states that do, taxpayers may deduct their state tax from their federal tax obligations. The taxes collected by states are used for public services like road repair and education.