My Money Five

Earn

The earn principle of the MyMoney Five is focused on the amount you are paid through work and understanding the details of your paycheck, including deductions and withholdings.

Withholdings & Form W-4

The amount of tax withheld is determined by how your Form W-4 is filled out.  Form W-4 asks questions regarding your tax filing status (Single, Married, or Head of Household), the number of dependents you will claim and if you will be claiming any tax credits.  A higher amount of tax will be taken out if you file the Form W-4 as single with one dependent versus married with dependents.  The IRS provides an IRS Withholding Calculator which can assist you in determining your appropriate level of withholdings.  

Payroll Deductions

Payroll deductions are deductions by your employer from your earnings.  Examples of these deductions are FICA (Federal Insurance Contributions Act) tax, Social Security, payment for health care benefits, retirement accounts, and other taxes.  Deductions are taken out as either pretax or posttax.  Pretax deductions reduces the amount of federal income tax you pay which allows you to keep more of what you earn.  Having pretax deductions taken from your income can reduce your taxable income and your tax liability.