dollar signed being squeezed

The Importance of Managing Money

Classes:
Introduction > Take the Test > Where Do You Get Your Money? > How To Handle Money > Budgeting and Saving > Conclusion


Where Do You Get Your Money? > Why is it important to know my income? > How can I figure out my income? > How much should I be paid? > How much should I be paid? > Paycheck

How come my paycheck may be less than what I am earning?

People who live and work in the United States are required by the law to report their earnings and pay taxes if their income is above the poverty level. The law also requires most employers to automatically take out your taxes from your paycheck and send them to the government for you.

How much you pay depends upon a number of things, including if you have any tax exemptions (such as family members whom you support) and where you live. However, some taxes, such as Social Security and Medicare/Medicaid stay the same. Below is a sample paycheck that explains how taxes are taken out.

Earnings: $400.00 Salary of $10 an hour times 40 hours worked.
Deductions:
24.80 FICA FICA is Social Security Tax. Everyone pays 6.2% of his or her income to Social Security. In return, they are eligible to receive Social Security benefits when they retire. Employers are responsible for donating an additional 6.2% to the employee's FICA.
$5.80 MED MED is Medicare/Medicaid tax. Everyone pays 1.45% of his or her income to Medicare/Medicaid. In return, they are eligible to receive medical benefits when they retire or if they have a long-term disability. Employers are responsible for donating an additional 1.45% to Medicare/Medicaid.
$21.60 WV SIN SIN is the State Income Tax for the state in which you live. The amount you pay in state income tax depends upon your state and how much you earn. In this example, someone who lives in West Virginia (WV) and earns $10/hour working full time for the year, would be required to pay 5.4%.
$60.00 US This is your Federal Income Tax. Again, how much you pay depends upon how much you earn each year. In this case, someone earning $10/hour working full time for the year, would be required to pay 15%.
Pay after taxes: $287.80

If you have additional questions about your income, taxes, or rights as an employee, contact MTSTCIL.

Next: How To Handle Money


Mountain State Centers for Independent Living