What is On a Paycheck?
Did you receive your first paycheck, but don't understand all the items on the paycheck? Learn about several of your paycheck items below:
- Employer Name and Address: This information is required when you prepare and efile your income tax return. It should also match your W-2.
- Payment Period: It should match what's listed on your W-2 from your employer.
- Filing Status: Make sure it's correct and matches the filing status that's on your W-2 and tax return.
- Pay Rate: Verifies that you are paid the amount that you negotiated with your employer.
- Federal Income Tax: This is the amount of federal tax that's withheld from your paycheck.
- Social Security Tax and Medicare: The amount is based on a calculation which you have no control about. Make sure you check your health, dental plan, and retirement plan contributions so they match your heath or retirement plan retirements.
- Net Pay: This is the calculation of your federal tax and Social Security Tax/Medicare.
How Can I Meet My Tax Goals?
You can decide whether you want a refund, owe taxes, or be tax balanced on your paycheck by reviewing and updating your federal W-4. You can do the same for your state income tax withheld.
What is a W-4?
Form W-4 is a form you complete and give to your employer. Your W-4 lets your employer know how much federal and/or state tax you want withheld for each pay period. The amount you want withheld from your paycheck is your allowance (or allowances).
What Do I Do If I Want More Money in My Paycheck?
You may want to increase your allowance amount. However, be aware that by increasing your allowances too much, you will end up owing taxes when you file your tax return because you did not have enough money withheld from your paycheck during the year.
What Do I Do If I Want More Money in My Tax Refund?
You may want to decrease your allowance amount. That way, the amount that you do not owe in taxes will be given back to you by the IRS as a tax refund. However, having a refund too large would result in the IRS keeping too much of your money before giving it back to you.
What Do I Do If I Do Not Want a Big Refund, but Just Enough So That I Do Not Pay Taxes?
You may want to balance your withholding so your refund comes from refundable tax credits and other tax breaks rather than from having too much money withheld from your paycheck. To accomplish your tax goals, you may need to adjust your allowances several times a year.
How Do I Know How Many Allowances to Claim to Meet My Tax Goals?
Use the free efile.com W-4 Paycheck Withholding Tool.