Budget Project 2020 Taxes and Withholding
Terms
- federal income tax
- FICA tax
- state, county, and city income tax
Links
- https://www.irs.gov/taxtopics/tc751
- https://www.adp.com/resources/tools/calculators.aspx
- https://www.irs.gov/pub/irs-pdf/fw4.pdf
- https://www.forbes.com/sites/kellyphillipserb/2018/02/28/figuring-out-your-form-w-4-under-the-new-tax-law-how-many-allowances-should-you-claim-in-2018/#57d2f0a735fd
After watching the video above, watch the video below and consider the question:
how does paying for all that free stuff government gives out affect your paycheck and the cost of things you buy?
Many young people hear political candidates making promises to provide free college or low-cost health care and jump on the bandwagon without considering who will pay for these benefits. It can be a real shock the first time you earn a paycheck and look at the pay stub listing all the deductions that were taken from what you earned. You can thank previous generations for committing a percentage of your income to pay for promises enacted by the legislators they elected.
Imagine getting to the end of the year and getting a bill for your share of the cost of government. Government officials know that if they operated that way, collecting income taxes would not work. Instead, taxes that are levied on income require employers to deduct an estimated amount for that tax from paychecks when they are issued. In other words, all employers are enlisted to act as tax collectors, and required to do so if they choose to hire employees. Imagine when a small business begins to think of hiring an employee and they have to consider what it will really cost. The salary is only the beginning!
Research Online
Research these taxes and see how many you can find rates for how much would be deducted from a paycheck. There are many paycheck calculators on the internet. They may not show you the actual rates you are paying in these taxes, but they should show you the amounts that would be deducted from your check. One that you might use is on the ADP site. In the left column of their page there are links to other calculators you might find handy, including one for hourly pay. These may help you in calculating amounts to enter in your spreadsheet.
- Employee and Employer Payroll Taxes
- Federal Withholding Tax
- Federal Unemployment Insurance Tax
- Social Security Payroll Tax
- Employer Portion (not deducted from gross pay and does not show on check stub)
- Employee Portion
- Medicare Withholding
- Employer Portion (not deducted from gross pay and does not show on check stub)
- Employee Portion
- State Withholding Tax
- State Unemployment Insurance Tax
- County Withholding Tax
- City/County/State License Fee
W-4
What is a W-4 form? Whenever you start a new job your employer will ask you to fill out this form. Download and look over the form and instructions (downloads as a PDF). As with many government forms it can be intimidating the first time you have to complete it, so look it over and figure out how you should fill it out. This article from Forbes may give you some helpful information.
Spreadsheet
Fill in your amounts in the Taxes/Withholding section of your spreadsheet, If you are turning this in to a teacher, be sure you keep your original so you can continue to work on the next assignment.