This week, Paula and Jon are joined by Tricia Chau of Payroll Vault, for a walk through the deductions that come out of your paycheck. The amount that is deducted from your paycheck can be quite surprising!

First is the FICA tax, which stands for the Federal Insurance Contributions Act – which includes Social Security and Medicare taxes.
Next, we break down deductions, both voluntary and involuntary. Federal and state withholding can depend on what you designate on your W4 form. Tricia explains how the W4 form has recently changed, to make it more about income and less about exemptions. Regardless, keeping this form updated, especially when you have a major life event, is crucial in making sure the right amount of taxes is being deducted from your paycheck.

If you have questions about this, talk to your accountant, CPA, or financial advisor – this is not something you should be discussing with your employer.

Voluntary deductions can include health insurance, 401k and other investments, and health care if related to a 125 plan, which Tricia explains.

How important is it to understand your deductions and make sure they are being taken out correctly? Tricia shares some horror stories of what can go wrong.

Tricia works with employers at Payroll Vault, and you can find her at https://payrollvault.com/178 or via phone at 248-833-6400.

To reach Paula, you can email her at paula@paulachristine.com