Some employers may also offer optional alternatives to paychecks, such as paycards , which can be advantageous to unbanked workers. Unlike withholding certificates and other employment documents, paychecks are pretty easy to decipher. Reading them is simply a matter of making sure the payment information is correct. Most states require employees to receive pay stubs. Actual pay stubs vary based on individual circumstances and the state. Some have specific requirements about the information that has to be included on the pay statement and when it must be delivered to employees.
When reviewing their first paycheck, those who are new to the workforce may wonder why their take home pay is less than their gross pay. The reason is because of taxes, withholdings and deductions such as these:.
When completing this form, employees typically need to provide their filing status and note if they are claiming any dependents, work multiple jobs or have a spouse who also works for married filing jointly purposes , or have any other necessary adjustments. FICA is a two-part tax. Both employees and employers pay 1. Those with high income may also be subject to Additional Medicare tax, which is 0. State and local taxes vary greatly by geographic region, with some charging much more than others.
Examples include:. Businesses that offer health insurance, dental insurance, retirement savings plans and other benefits often share the cost with their employees and withhold it from their pay. Depending on the type of benefit and the regulations that apply to it, the deduction may be pretax or post-tax.
To calculate taxable income, you begin by making certain adjustments from gross income to arrive at adjusted gross income AGI. Once you have calculated adjusted gross income, you can subtract any deductions for which you qualify either itemized or standard to arrive at taxable income. Note that there are no longer personal exemptions at the federal level. Prior to , taxpayers could claim a personal exemption, which lowered taxable income. The new tax plan signed by President Trump in late eliminated the personal exemption, though.
Deductions are somewhat more complicated. Many taxpayers claim the standard deduction, which varies depending on filing status, as shown in the table below. Some taxpayers, however, may choose to itemize their deductions. This means subtracting certain eligible expenses and expenditures. Possible deductions include those for student loan interest payments, contributions to an IRA, moving expenses and health-insurance contributions for self-employed persons.
The most common itemized deductions also include:. If the standard deduction is larger than the sum of your itemized deductions as it is for many taxpayers , you'll receive the standard deduction. Once you have subtracted deductions from your adjusted gross income, you have your taxable income.
If your taxable income is zero, that means you do not owe any income tax. Unlike adjustments and deductions, which apply to your income, tax credits apply to your tax liability, which means the amount of tax that you owe. Tax credits are only awarded in certain circumstances, however. By contrast, nonrefundable tax credits can reduce your liability no lower than zero.
The list below describes the most common federal income tax credits. There are numerous other credits, including credits for the installation of energy-efficient equipment, a credit for foreign taxes paid and a credit for health insurance payments in some situations.
Whether or not you get a tax refund depends on the amount of taxes you paid during the year. This is because they were withheld from your paycheck. However, it also depends on your tax liability and whether or not you received any refundable tax credits. When you file your tax return, if the amount of taxes you owe your tax liability is less than the amount that was withheld from your paycheck during the course of the year, you will receive a refund for the difference.
This is the most common reason people receive a tax refund. If you paid no taxes during the year and owe no taxes, but are eligible for one or more refundable tax credits, you will also receive a refund equal to the refundable amount of the credits.
For starters, you should still file your taxes on time. Otherwise, you will also have to pay a fee for filing late. The agency may be able to offer you a few payment options to help you pay off your bill. For example, the IRS may offer a short-term extension or temporarily delay collection. You may also have the option to pay your remaining bill over multiple installments. This will apply the Scottish rates of income tax. If you know your tax code, enter it into the tax code box for a more accurate take-home pay calculation.
If you are unsure of your tax code just leave it blank and the default code will be applied. If you have a pension which is deducted automatically, enter the percentage rate at which this is deducted and choose the type of pension into which you are contributing. Pension contributions are estimates, click to learn more about pension contributions on The Salary calculator. If you receive Childcare vouchers as part of a salary sacrifice scheme, enter the value of the vouchers you receive each month into the field provided.
If you signed up for the voucher scheme before 6th April , tick the box - this affects the amount of tax relief you are due. Select your age range from the options displayed.
If you are married, tick the "Married" box. Similarly, tick the "Blind" box if you are blind. If you are repaying a student loan for a course which started before 1st September , tick "Plan 1", if you are repaying a student loan for a course which started on or after 1st September , tick "Plan 2".
If you are repaying a loan for a postgraduate course, tick "Postgraduate". You can now choose the tax year that you wish to calculate. When you're done, click on the "Calculate! You'll be able to see the gross salary, taxable amount, tax, national insurance and student loan repayments on annual, monthly, weekly and daily bases.
More information on tax rates here. From April If you live in Scotland, income tax is calculated differently than if you live in the rest of the UK. The rates and thresholds are set by the Scottish Government.
You are classed as living in Scotland if that is where your main residence is. More information is available here and here. The furlough scheme was due to be replaced by the Job Support Scheme in November , but the furlough scheme has been extended and the Job Support Scheme may be introduced later in the year.
This scheme offers support to employers who bring their staff back to work gradually. During the Coronavirus outbreak, the government have said that they will subsidise employers' costs to pay staff who are not working and are instead placed on "furlough".
To make sure this cap is applied to your calculations, tick the box. For some people, although the amount they are getting paid has been reduced, their pension contributions are still calculated on their full salary. If this applies to you, tick this box and the calculator will use your full salary to work out the pension contributions to apply.
If you know your tax code, enter it here to get a more accurate calculation of the tax you will pay. If you are unsure of your tax code, just leave it blank and the default will be applied. FICA contributions are shared between the employee and the employer.
However, the 6. It will still have Medicare taxes withheld, though. There is no income limit on Medicare taxes. If you make more than a certain amount, you'll be on the hook for an extra 0. Here's a breakdown of these amounts:. If you work for yourself, you need to pay the self-employment tax , which is equal to both the employee and employer portions of the FICA taxes Luckily, when you file your taxes, there is a deduction that allows you to deduct the half of the FICA taxes that your employer would typically pay.
The result is that the FICA taxes you pay are still only 6. There are also deductions to consider. For example, if you pay any amount toward your employer-sponsored health insurance coverage, that amount is deducted from your paycheck.
Also deducted from your paychecks are any pre-tax retirement contributions you make. These are contributions that you make before any taxes are withheld from your paycheck. The most common pre-tax contributions are for retirement accounts such as a k or b. If you increase your contributions, your paychecks will get smaller.
However, making pre-tax contributions will also decrease the amount of your pay that is subject to income tax. The money also grows tax-free so that you only pay income tax when you withdraw it, at which point it has hopefully grown substantially. Some deductions from your paycheck are made post-tax. These include Roth k contributions. The money for these accounts comes out of your wages after income tax has already been applied. If you are early in your career or expect your income level to be higher in the future, this kind of account could save you on taxes in the long run.
Some people get monthly paychecks 12 per year , while some are paid twice a month on set dates 24 paychecks per year and others are paid bi-weekly 26 paychecks per year.
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