Payroll Deductions

Pay Stubs

You receive this when you get paid. When you get paid, you will receive a pay stub Includes a TON of information about you and your money. Information about the your income and the taxes you pay

Gross Income

How much you make before taxes and deductions are taken out the total amount you make

Pay Period

Time frame in which you earned the wages

Payroll Deductions

Amounts taken out of an employee’s paycheck per pay period. Lowers how much you make (decreases gross pay).

Involuntary Payroll Deductions

Holdings that are legally required to be held from employee’s paycheck

Based on federal, state and local rule

Involuntary Payroll Deductions examples

Federal Insurance Contributions Act

Federal/state income tax

Local tax withholdings

Mandatory Deductions

Income Tax-Tax on income from the federal and state government

Federal Income Tax → biggest revenue source

Income tax is Normally somewhere between

between 12% and 24% based upon income

Progressive Tax Rate

when the tax rate you pay increases as your income rises.

Mandatory Deductions Examples

FICA (Federal Insurance Contribution Act), Social Secuirty, and medicare

FICA (Federal Insurance Contribution Act)

Payroll tax used to pay for Medicare and Social Security

Voluntary Payroll Deductions

Holdings that are employee chosen to be held from an employee’s paycheck

Voluntary Payroll Deductions examples

Retirement funds (IRA, Roth IRA, 401k)

Health insurance

Life insurance

Why Pay Voluntary Deductions

When paying for things you need it can help you save money

Pay for it pre-tax

Pay less in taxes the more deductions you have