College graduation is an exciting time. Young people all around the country are closing the chapter of college, and moving into the workforce. It’s an exciting time, but it’s also scary - a lot of new life changes are thrown at recent grads. For some, it means the first time they’ll be living outside of student housing or their parents’ house. It could be the first time for others that they ever have to complete a W4, or set up direct deposit. What are the most important items to know, after you receive your diploma? We’ve outlined three:
How to fill out your Form W4. We recommend using the W4 Assistant on paycheckcity.com. Your Form W4 is required to be filled out when you begin a new job. Once completed, the form tells your employer what taxes to withhold from your paycheck. A Form W4 asks basic questions, like if you’re married or single. It will also ask you how many allowances you wish to claim. Permissible withholding allowances include:- One for you, unless you're claimed as a dependent by someone else.
- One for your spouse (if you're married) unless he or she is working and claims the allowance on his or her W4.- One for each dependent you have.
You will also have the opportunity to withhold additional amounts or claim exempt. For help understanding W4 allowances, check out this article.
How your paycheck is calculated. Your take-home pay is calculated by starting with your gross pay and subtracting any deductions and/or allowances. Your take-home pay is also called your net pay. Your gross pay is calculated by taking your hourly rate and multiplying it by the number of hours worked. Your paycheck will also include year-to-date information, which allows you to see how much you have earned in a calendar year so far.
Deductions. - Federal income tax withholding is based on your W4 and the withholding tables in Publication 15 from the IRS.- FICA (Federal Insurance Contributions Act Tax) includes social security and medicare.
For more information on FICA, read this article.
- State income tax withholding (based on where you live).- Local tax withholding (also based on where you live).
If you're curious how states and localities will impact your taxes and take-home pay, try out a few calculations using the salary or hourly calculators on PaycheckCity.