Whether you receive your paycheck in the mail or through direct deposit, you may feel as though it’s not quite what you should have earned. While you may need to investigate issues with your company, the other likely reason for this discrepancy is the task. Many individuals want to know, How much taxes are taken out of my paycheck?
At some point in your life, you have probably said to yourself, How much taxes are taken out of my paycheck? While you may think that the answer is a simple figure, figuring out how much taxes are taken out is not necessarily a process that takes a couple of seconds to complete. In fact, a number of factors go into the amount of money that is taken out of your paycheck.
How Much Taxes Are Taken Out of My Paycheck? 7 Factors Influencing the Amount
1. Your Earnings
The amount of money that you make actually plays a roll in how much is taken out in terms of taxes. You might have heard people say that they prefer to get paid more times per month. This is because lumping all of the pay together ends up in an increase is taxes taken out.
Also, if you earn a very small amount of money, then you may not need to pay taxes at all on that particular sum. For example, you might make a few hundred dollars from a side job one year. Therefore, you may not need to pay taxes on those earnings.
2. Your Employment Status
Your employment status can also affect the amount of taxes that you pay. For example, some people are self-employed. You might work as a freelance writer. If that is the case, taxes are generally not taken out of your paycheck at all. No federal or state taxes are removed from your check in such situations. Instead, you are required to make quarterly payments to both the federal government and the state to cover the cost of these taxes.
You might think that you will just wait until the end of the year to see what you owe. This approach could leave you with a prodigious sum of money to pay, and you may also get a penalty.
3. Federal, Status and Local Taxes
You’re likely still asking, How much taxes are taken out of my paycheck? The answer isn’t a simple one because it depends upon current federal, state and local rates. All three of these entities can require that taxes come out of your paycheck. On top of that, the rates can change.
If you knew the rate a decade ago, that figure is not likely now as it was then. Researching the three rates at the current time can help you determine if the proper amount of money is being taken out.
4. Filing Status
When you first started working at your current place of employment, you probably had to fill out paperwork that asked you to indicate your filing status. The status that you selected generally affects how much money is taken out of your paycheck. You could go to your employee and ask, How much taxes are taken out of my paycheck? You may very well discover that the answer is connected to the filing status you selected when you first started with the company.
Changing the filing taxes could allow you to have more money in your check. Keep in mind that if you have more money with each check, then you may owe more or get less back after you file your taxes. Paying more with each check:
- Could lead you to a larger return later;
- Could help prevent yourself from owing too much in taxes.
Upon filling out that paperwork, you probably also had to check off any exemptions that apply to you. The exemptions can also affect the answer to the question of How much taxes are taken out of my paycheck?
If it has been awhile since you’ve seen that paperwork or if you can’t remember what you checked off when you first started working, now is the time to ask for a copy of it. You might have errors on there. Correcting the errors can help when it comes to taxes.
6. Owed Taxes
Some people owe taxes seemingly year after year. It could be that these individuals are self-employed and they are not paying enough money with each of their paychecks. It could also be that the employers are not taking enough money out of each paycheck. People should work to resolve both issues. You might be noticing that your paychecks are less because you owe taxes from previous years.
If you owe taxes that are too much for you to pay in a lump sum, you should look into payment plans. These types of plans are generally offered at both the state and national level. The reason that your paychecks are lower than you think might be because one of these entities is garnishing your wages since you failed to pay taxes.
When you start at a new job and fill out the paperwork, you generally assume that the employers will process this information correctly and that you won’t have an issues moving forward. However, that is not always the case. The reason why you are seeing so much money come out of your paycheck could be due to a processing error.
If you are concerned that you have too much money coming out, you should speak to your employer. You should also have a conversation if you don’t think enough is coming out. This is because you will just need to pay the appropriate taxes when you file your documents.
Evaluating Your Paycheck
Some people just accept that their paychecks are correct. Others don’t look into the amount at all.
You should get to know your paycheck and the amount of taxes that should come out to protect yourself.
The images are from depositphotos.com.