JagInsights › Lessons › Paycheck taxes
What actually comes out of a paycheck
The offer letter is gross pay. The deposit is what is left after tax and the benefits you chose. A budget that uses the larger number is already short.
Federal withholding is an estimate of income tax. FICA is Social Security and Medicare, set in law. A refund is money you already overpaid. None of those lines is a bonus.
Withholding is an estimate, not a grade
Federal income tax withholding comes from the W-4 you gave payroll. It is a guess at the tax bill for the year. Too much withheld, and the difference comes back as a refund. Too little, and a bill arrives. The IRS publishes a withholding estimator. This page is not a filing.
State income tax works the same idea where a state has one. Some states have none. The stub is the source for your job, not a national slogan.
FICA is a different tax
FICA is Social Security and Medicare. It is not the same line as federal income tax. For a W-2 job, the employee share is set in law, and the employer pays a matching share you do not see on the stub. Self-employment tax is the same programs, billed a different way.
Social Security has a wage cap that the Social Security Administration publishes and that changes. This lesson does not quote it. Medicare does not use that same cap.
A refund is your cash, delayed
A large refund is not found money. It is an interest-free loan to the Treasury that you made in small pieces all year. Some people like the forced savings. Others would rather have the cash each payday. Neither choice is a personality test.
Contractor pay on a 1099 often has no withholding at all. Quarterly estimated tax exists for that reason. Missing it is how April becomes a second job.
Questions people ask
Should I change my W-4 to get a bigger check?
A bigger check now can mean a bill later. Use the IRS estimator. This page does not file for you.
Is FICA optional?
For covered W-2 wages, no. The rate and the wage cap are law. This page does not quote either, because they change.
Does a 401(k) change these lines?
A traditional contribution can lower taxable wages now. A Roth contribution lowers take-home without that same cut. FICA still applies to wages in the usual case.
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