What is your take-home pay? Even though your salary may be $115 per week, you may only take home $85 per week. Your employer must withhold some of your pay each pay period for federal taxes, state taxes and social security. Your employer may also deduct for disability insurance. Federal and state taxes are collected to pay for services you receive from these governments.
Social Security money is collected by the federal government to pay your retirement benefits. They keep track of how much you have paid with your social security number. These deductions are required by law and you generally have few choices about them.
Disability insurance provides money to pay you a salary if you are too sick to work. Your employer will know how much to withhold from the figures you provided on the W-4 form which you fill out when you are first hired. Completing the W-4 form may require your last year’s tax form and/or help from your employer. It is important to fill it out so that enough money is withheld. Then you will not have to pay additional taxes and may even get a refund when you submit your income tax forms which are due on April 15th of each year.
The amount of money you are paid before these deductions are made is called your “gross pay”. The amount of money you actually receive after your employer has made all the above deductions is called your “net pay”. You should use the figure for your net pay in order to plan your budget.