Tax Forms, Compensation Methods, and Payroll Deductions

Tax and Employment Forms

  • Form W-4:

    • Formally titled the Employees withholding allowance certificate.

    • Completed when starting a job to determine tax withholding based on the number of claimed dependents.

  • Form I-9:

    • Completed upon hire to verify identity and legal authorization to work in the U.S.

    • Requires presenting two forms of identification (e.g., driver's license, state ID, Social Security card, birth certificate, or passport).

  • Form W-2:

    • Document provided or mailed by employers by the end of January.

    • Details total income earned and total taxes paid during the previous calendar year.

    • Used to file tax returns, which are due by April 15 each year.

Methods of Employee Compensation

  • Direct Deposit:

    • Automatic transfer of earnings into a bank account, typically arriving at midnight on payday.

    • Safe, quick, convenient, and cost-saving for employers.

  • Paycheck:

    • Physical paper check issued to an employee.

    • Less secure due to the risk of being lost or stolen.

  • Payroll Card:

    • Prepaid bank or debit card onto which wages are loaded.

    • Least convenient method, as non-affiliated bank usage may incur fees.

Income and Payroll Deductions

  • Pay Period:

    • The predetermined length of time used to calculate employee wages (e.g., weekly, biweekly, monthly, or on specific dates).

  • Gross Income:

    • The total amount of money earned prior to any tax withholdings or payroll deductions.

  • Payroll Deductions:

    • Standard amounts withheld from gross pay, including federal withholding (the largest deduction), state withholding, local/city taxes, and FICA.

  • FICA (Federal Insurance Contribution Act):

    • Social Security: Provides retirement income for the elderly as well as disability benefits.

    • Medicare: Health care program specifically for the elderly and disabled.