Figure Paycheck Deductions
One of the recurring tragedies of American life is the opening of the pay envelope and discovering that there is not quite as much as was expecting. If you figure your paycheck deductions ahead of time, this is avoided.
It is true that payroll deductions take a big bite out of your pay check. There are two basic kinds of paycheck deductions. There are the ones that you have no choice about and the ones that you do. Federal, State, and FICA taxes represent the involuntary deductions. They are taken from your pay because the law says they must be and the funds are sent in to the Government agency involved. Voluntary deductions may be for retirement plans or employee savings plans. There are a lot of different voluntary deductions that can be made. If you know how to figure you paycheck deductions, you can avoid the shock factor when you open the pay envelope.
The taxes are deducted according to a set rate. This rate depends on your individual exemptions and tax payer status. This information is given to the payroll department at the beginning of employment. It is important that the information be correct, or at least what you want it to be, as the deductions will be made on each check according to this information.
An example of how this works is the paycheck with a massive amount of overtime. This creates a much larger than usual gross salary. The computer that is being used to figure the paycheck deductions will not recognize that you are making much more than normal. It will assume this is your normal salary and tax you accordingly. This will result in a much higher tax rate being applied. This money is not lost to you. In a sense, you are overpaying your taxes for that week, and it will get all sorted out when you file your return at the end of the year. The problem is that most employees who work overtime are not very happy with waiting for a year to realize the extra income.
One way to avoid surprises is the figure paycheck deductions on your own. Do not wait for the check. If you gather the appropriate tax rate information and fully understand the nature and amount of all voluntary deductions, you can do this with a simple calculator. There are several web sites that offer payroll calculators that can do this for you. All you need to do is put in your hours and rate of pay and you will get a result that will tell you how much money should be in the envelope.
Some of the online calculators are free to use and others require you pay a small user fee to utilize the service. Either way, the important thing is to make sure you have gathered and are entering accurate information. You must know the number of personal exemptions and the filing status being used in your payroll department as well as the exact number of hours worked and pay rate. In the case of voluntary deductions, you must know if the amounts are set or based on a percentage of earnings. If you have the information correct, you can figure your own payroll deductions and end paycheck surprise.