Paper Paycheck: A check you get on paper that you can physically give to the bank.
It is the most common method, provides the employee with his or her paycheck, shows the deductions, and the employee is responsible for handling paycheck.
Direct Deposit: Method used for employees who put their paycheck into the bank the day they get it. There is no need for finding the deductions, as that is already done for you.
It is secure and easy to use.
Payroll Card: This is the third and newest method to pay employees. It is a prepaid card that is offered to employees as an alternative to paper paychecks or directly depositing wages into an employee's depository institution account.
Functions like a debit card.
Examples of Fees Charged by Payroll Companies
Protection: Regulation E, or the electronic transfer act, allows any fraudulent transactions if reported within 48 hours you will only be responsible for for $50. Benefits to Employers: Increased safety (no need to carry around cash), 24 hour access to funds. There are no check cashing fees each pay period. Benefits to Employees: Access to an electronic monthly statement of transactions, option for a second card.
Taxes
Taxes: Compulsory charges imposed on citizens by local, state and federal governments used to fund public goods and services. Internal Revenue Service: The governmental agency responsible for collecting federal taxes, issuing regulations, and enforcing tax laws written by the United States Congress.
Employment Forms
Form W-4: Withholding Allowance Certificate
Allowance: Used to determine the amount of federal taxes withheld from the paycheck.
Dependent: A person who relies on the taxpayer for financial support.
Payment Forms
Payment Option Choice: Direct deposit, payroll card, paper paycheck.
You can then see what you have paid and the deductions.
Funded by Tax Dollars: Any governmental jobs, post offices, public schools, police departments, fire departments, snow plowing, and state funded parks. Tax Laws: Tax laws are written by the United States Congress.
A person may claim a personal allowance on their Form W-4 if no one else claims them as a dependent.
Dependent: A person who relies on taxpayers for financial support.
Reading a Paycheck Stub
Paycheck Stub: A paycheck stub list, the paycheck deductions as well as other important information. Personal Information: States the employee's full name, address, and social security or employee identification number. Gross Pay: The total amount of money earned during the pay period before deductions. If a person earns an hourly wage, gross pay is calculated by multiplying the number of hours worked by the wage. Net Pay: The amount of money left after all of the deductions have been withheld from the gross pay earned during the pay period. Deductions: This is the amount of money that is subtracted from the gross pay for other taxes, medical benefits, or retirement benefits.
Required and Optional Deductions
Federal Withholding Tax: The amount required by law for employers to to withhold from earned wages to pay taxes. This represents the largest deduction withheld from an employee's gross income. The amount withheld depends on two things, the amount of money earned and the information provided on the form W-4. State Withholding Tax: The percentage deducted from an individual's paycheck to assist in funding government agencies within the state. The percentage of deduction depends on the amount of gross income the employee has earned. FICA: (Federal Insurance Contributions Act) United States payroll (or employment) tax imposed on both employees and employers to fund social security and medicare. Fed OASDI/EE or Social Security: The nation's retirement program. This tax helps provide retirement income for elderly and pays disability benefits. Social Security taxes are based upon a percentage (6.2%) of the employee's gross income. Fed MED/EE or Medicare: The nation's health care program for the elderly and disabled. This tax provides hospital and medicine insurance to those who qualify. Retirement Plan: The amount an employee contributes each pay period to a retirement plan. A specified percentage of the contribution is often matched by the employer. This may be a 401k, state, or local retirement. Medical: The amount taken from the employee's paycheck for medical benefits. This occurs when the employer has a medical plan for employees, but does not pay full coverage for his/her benefits. Year-to-Date: Totals all of the deductions which have been withheld from an individual's paycheck from January 1 to the last of the day period indicated on the paycheck stub.