Tax Deduction Consulting: Payroll Deduction Wasilla AK
Eagle River, AK
Shilanski & Associates, Inc.
Years of Experience: 9
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Eagle River, AK
Tax Deduction Consulting: Payroll Deduction
There are very few employees who have not experienced that sinking feeling upon opening their pay envelope and finding much less than they anticipated. Payroll deductions are the culprit.
It is a rare employee who has not raised his fist in frustration upon opening his pay check and cursing the amount of payroll deductions that has reduced his "take home" pay to such a small amount. Payroll deductions actually fall into two major groups. The first is the mandatory ones and the second is the optional ones. The employer is not the bad guy in the first case as Federal and State laws require them to withhold your taxes and pass them on to the appropriate Government agency on your behalf.
When you are employed you should fill out a W-4 form and the equivalent State Tax form. Seven States currently do not tax personal income, and two others tax only dividends and interest income. The remaining states will require the deduction of State Income tax as well as Federal tax withholding. The amount of tax withheld as a payroll deduction will be determined by the information contained on the W-4 form. The amount withheld depends on your filing status and number of exemptions. You can also specify and additional amount to be deducted in box six.
There are two trains of thought on additional withholding and even on claiming the total amount of exemptions to which you are entitled. The first approach says that it is better to overpay the IRS and then you will be entitled to a refund when you file your taxes. It is important to remember that you are going to owe what you owe, so if you overpay, it will be refunded to you. Many people see this as better than having to pay in before April. The other approach says that the extra money is yours and could be better used by you or invested by you during the year. Why, these taxpayers ask, should the IRS have your money for the year?
The other mandatory payroll deduction besides Federal and State taxe...