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Understand your first paycheck | Allstate Blog



You just got your first paycheck and – surprise! – It may be quite a bit smaller than you expected. Don't worry, but nothing is wrong. Your employer has simply deducted a number of mandatory fees (and possibly some optional) payroll taxes. Therefore, you see so many deductions listed on your payroll.

Here are some conditions related to your paycheck that you may want to understand better, as well as a distribution of what is usually deducted and why.

Gross Pay [19659004] This is the amount of your paycheck before any deductions are made, says Consumer Financial Protection Bureau (CFPB). For example, if you earn $ 45,000 a year and are paid monthly, your gross salary should be $ 3,750 ($ 45,000 divided by 1
2 months). If you are paid twice a month or every other week, your gross amount will amount to approximately SEK 1,875 per passport check (see "Pay period").

Net salary

"Net" refers to how much money remains after tax and Other deductions are subtracted. This is the actual amount you can pay or that is automatically deposited in your bank account, CFPB says.

Payment Period

This specifies how often you are paid, as the CFPB states are planned by your employer. Common pay periods are monthly, twice a week, half hour or week.

Filing Status

When you filled in the necessary paperwork to start the job, you filled in a W-4 form. At that time, you will notice whether you are single, co-seeking, married separately, household manager or a qualified widow with dependent children, according to the Internal Revenue Service (IRS). If more than one of these applies, you can use the one that offers the best tax benefits, says the IRS. (If you have questions about this, for example, whether to put together or separately, talk to your tax advisor.)

Federal Taxes

The filing status (see above) you selected on your W-4 will help your employer calculate how much you should keep from your salary for federal income taxes. The amount you see as "Federal Tax Withholding" on your payment slip is what your employer should send to the IRS on your behalf. Everyone pays another sum in federal taxes, depending on their income.

Government and Local Taxes

This deduction corresponds to much federal taxes, except that it is the money your employer sends to your state and city or county revenue division on your behalf, says the American Institute of CPAs (AICPA). How much you pay in state and local tax depends on your income and the state or municipality tax rates.

Social Insurance or FICA Tax

You are legally obliged to contribute to social security, which is the US benefit program for pensioners, people with disabilities and survivors, such as a spouse or child, of those who contribute to social security . It is listed on your salary bar as FICA, which stands for Federal Insurance Contributions Act. As of 2018, you contribute 6.2% of your gross salary (minus premium deductions before tax for healthcare) to the program. Your employer contributes an additional 6.2 percent on your behalf.

Medicare

This is another legal deduction specified under the FICA heading. This amount goes towards Medicare, which is the US health insurance program for retirees. Your paid contribution is 1.45 percent of your gross salary (minus your premium fee before tax) and your employer pays the same amount on your behalf, the IRS says.

401 (K) or 403 (b) Contributions

If you are eligible to contribute to your employer's retirement plan (a 401 (k) is also called a "deferred compensation plan") and notify you to have funds automatically deposited in That, you will likely see this deduction listed on your paycheck. If you work for a public school or a tax-exempt organization, and are included in the available pension plan (also called "tax-protected annuity"), you see a deduction for 403 (b). The deduction amount depends on the percentage of your salary you chose to contribute. Many retirement pensions are considered "tax deferred" – which means you do not pay taxes on them until you actually withdraw the money from your account. As a result, these deductions can easily reduce how much you pay this year in federal taxes, AICPA explains.

If your company offers a match on the money you contribute to your retirement plan, you will likely see it listed on your payroll statement as well. However, that amount will not be deducted from your paycheck because your employer pays for it.

Employee paid health insurance premiums

If your company pays 100 percent of your health insurance costs, you will not have any money deducted from your paycheck. However, if you pay for all or part of your health, dental or vision benefits, your portion of the cost will be deducted from your AICPA paycheck. Your premium is the amount you pay regularly for your insurance.

Other deductions

If you pay for other companies' sponsored benefits, such as life or function insurance, you see these premiums listed as deductions from your paycheck. Depending on the plan, these costs can be deducted either before or after tax on your paycheck is calculated. If your company offers a flexible expense account, you may be able to contribute money to either health care or dependent care account before tax (which means you don't pay taxes on the fees), Federal Flexible Spending Account Program says. These amounts will be deducted from your salary and stated on your salary part.

This year's result

As it means, this part will describe how much gross salary you have earned so far this year – excluding your current pay stub, AICPA says. However, you cannot see this noted if your income is below a certain level.

For more help in understanding any of the items in your payroll statement, contact your company's pay or employment office.

] Originally published May 2, 2016.


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