introduction

executive summAry

This book is written as an introductory Department of Labor (DOL), Citizenship guide for someone who just got their first and Immigration Services, and others. job (Congratulations!), a foreign visitor We’ve incorporated symbols throughout authorized to work in the United States – the book that point out special hints, tips including permanent immigrant workers, and warnings as you read through the temporary (non-immigrant) workers, and pages. student and exchange workers – a U.S. citizen working in another country, or As an employee, you receive legal someone returning to the workforce. It is protection from the federal government designed to familiarize you with how the (the United States) and individual states system works. and localities. There are also U.S. and state-based tax requirements that By system we mean the U.S. federal your employer must satisfy by taking tax system, and related government deductions from your pay. The federal organizations on federal, state and local government and 41 of the 50 states levels. On a federal level, it includes require income tax withholding. the Internal Revenue Service (IRS), Social Security Administration (SSA),

AmericaAn PaAyroll AssociaAtion Chapter 4 • PRE-TAX DEDUCTIONS, OR, HO W TO REDUCE THE INCOME TAXES YOU PAY ii2 introduction Learn more Here are symbols you’ll see throughout the book. executive summAry They point out special hints, tips, and warnings.

That’s not all. You may be participating We value your feedback! Reach us with go online to download forms and in a health plan, retirement plan, or other your thoughts and comments. get quick links to useful sites. benefit plan that you pay into through payroll deductions. Or you may have other DID YOU contAct us did you know? Helpful facts. legal obligations for which your employer KNOW? is required to deduct. This guide will help you understand how they work, and provide know your rights the background to ask more questions for in several important situations. those areas that remain unclear.

There are all sorts of ways to receive your wArning! Don’t make these pay, from cash to check, to direct deposit mistakes! and paycard. The book discusses each one and provides the pros and cons to consider. Please consult the Table of Quick tiP to make the process go Contents for a full overview, and see more smoothly. our comprehensive index for additional information. don’t Forget reminders of important documents to bring or to make sure you fill out.

AmericaAn PaAyroll AssociaAtion Chapter 4 • PRE-TAX DEDUCTIONS, OR, HO W TO REDUCE THE INCOME TAXES YOU PAY iii2 tAble of contents

chAPter 1: when you get A Job chAPter 4: Pre-tAx deductions chAPter 6: your rights And resPonsibilities in the workPlAce Getting Started: Your Social Security Number ...... 3 Tax-Deferred Retirement Plans ...... 41 Proving Your Right to Work: US Citizenship and Immigration Cafeteria Plans ...... 44 First the Basics: Form W-2, Your Wage and Tax Statement ...... 64 Services Form I-9, Employment Eligibility Verification ...... 3 Medical Savings Accounts ...... 46 The Earned Income Credit ...... 67 Paying Your Fair Share, Part 1: Form W-4, Employee’s Health Savings Accounts ...... 46 Withholding Allowance Certificate ...... 8 Check on Your Social Security Benefits ...... 69 Transportation Fringe Benefits ...... 47 Paying Your Fair Share, Part 2: State Employee Workers’ Compensation Insurance ...... 70 Calculating Your Pre-Tax Deductions .. 48 Withholding Allowance Certificates ...... 14 The Family and Medical Leave Act ...... 70 ‘COBRA’: Your Right to Continued chAPter 5: AFter-tAx deductions chAPter 2: PAycheck bAsics Health Coverage ...... 74 Involuntary Deductions ...... 53 Educational Assistance Benefits ...... 75 Getting Paid ...... 16 Voluntary Deductions ...... 60 Adoption Assistance Benefits ...... 76 The Wage and Hour Law, Or, How Do You Know Your Paycheck Is Correct? ...... 19 Unemployment Insurance Benefits ...... 76

chAPter 3: your PAy stub And tAxes chAPter 7: beneFits oF electronic PAy

Income and Employment Taxes ...... 27 Electronic Wage Payment: Go Green With Your Green ...... 81 Social Security Summary ...... 38

Medicare ...... 38 index ...... 84 State Unemployment and Disability Insurance Taxes ...... 38

AmericAmericAann PPAayrollyroll AssociAssociAationtion Chapter 4 • PRE-TAX DEDUCTIONS, OR, HO W TO REDUCE THE INCOME TAXES YOU PAY iv2 in this chAPter

Getting Started: It all starts with a Social Security number, we’ll explain its importance and how to get one or update one you already have. Proving Your Right to Work: Form I-9, we’ll walk you chAPter 1 when you get A Job through what it is and what you’ll need to prove who you are and your right to work. Paying Your Fair Share, Part 1: Form W-4 can seem daunting to many, we’ll break it down for you. Paying Your Fair Share, Part 2: State employee withholding allowance certficate, do you need one? Plus Quick tips, online resources, and a first-day checklist. chApter 1 when you get A Job

Congratulations, you got the job! Your job hunt has paid off, and now you have some paperwork to do. On your first day you’ll be filling out several forms and supplying various documentation. Your employer requires proof that you can legally work in the U.S. and they’ll also need information to calculate your taxes. Once these forms are completed (either on paper or online), they will be kept on file in the payroll or human resources department.

Your First dAy checklist

you’ll need to hAve you’ll need to comPlete Your Social Security number Form I-9, Employment Eligibility stAte withholding AllowAnce certiFicAte Verification: The information you provide Documents proving your identity If you live or work in a state with state and right to work in the U.S. on this form shows you can work in the U.S. income tax, this information makes it (see Form I-9, lists A, B, and C, Form W-4, Employee’s Withholding possible for your employer to figure for acceptable documents). Allowance Certificate: Your employer uses your state taxes. Depending on where this form to calculate the federal income you live, you might also be asked to DON’T tax you owe each pay period. This tax is fill out forms for county, city, or school FORGET automatically subtracted from each paycheck. district income tax withholding.

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 2 getting stArted: your so, how do i get A sociAl security number? Administration. When you get your new card in Getting Started: Your If for some reason you don’t have a Social the mail, take it in to your employer and have sSocialociAl sSecuritecurityy nNumberumber Security number, fill outForm SS-5, your name changed on the payroll records. If Application for a Social Security Card, and your employer changes your name before you It’s a good idea to bring your Social Security submit it to the Social Security Administration receive your new card, someone may make card with you on your first day of work. You along with any required documents. To find a mistake in reporting wages to your Social will need your Social Security number to Form SS-5: Security account. The possible result: you might complete several forms, and your employer receive less money than you should when you may ask to make a copy of your card. Your • Ask for one from your employer. retire or become disabled. And finally, destroy Social Security number is a nine-digit • Call 800-SSA-1213. your old card. number, grouped and hyphenated • Download Form SS-5 from the Social There is another reason for getting a new like this: 123-45-6789. Security Administration website. • Visit a local Social Security Administration Social Security card when you change your office to pick up a form. name. If you’re married and file a joint tax whAt’s so imPortAnt About my return with your spouse, the IRS will reject the sociAl security number? When you finish filling it out, submit it to joint return if the names and Social Security the Social Security Administration with any numbers on the return do not match the Social When you get your Social Security number, documents that are required. If you need any Security Administration’s records. an account is set up with the Social Security help, call the toll-free number above. Administration. Each year, wages are Proving your right to work: recorded in your account. When you retire, or iF my nAme chAnges, do i need A new sociAl security cArd? us citizenshiP And immigrAtion services if you become disabled, your Social Security Yes. If your name changes because of marriage, Form i-9, emPloyment eligibility veriFicAtion benefits will be based on your total earnings. divorce, or some kind of legal action, you must The IRS and your employer will use your obtain a new Social Security card and show it Upon employment, you have to prove your Social Security number as your personal to your employer. First, complete Form SS-5, identity and right to work in the U.S. Federal ID number when your wages and taxes are Application for a Social Security Card, to file law requires employers to make sure they reported. It will also go on your tax return. your- name change with the Social Security- don’t accidentally hire illegal aliens. Your AmericAn PAyroll Associ123Ation 45chAPter 1 • when you get A job 6789 3 employer will check your documentation to make sure it’s genuine and to be certain that you’re legally allowed to work. Regardless of your nationality, your Know your Rights employer will want to review your documents within three days after your first day of work. identity theFt And identity FrAud it’s your choice how cAn i Prove my identity And right to When you present proof of work in the us? Identity theft is one of the fastest growing crimes in the U.S. It occurs when someone uses information your identity and right to work It’s easy! On your first day of work, you need to fill that uniquely identifies you—such as your to your new employer, it is out the employee portion in Section 1 of Form I-9. Social Security number—without permission, to within their legal right to make Your employer will complete the rest of the form. This commit fraud. It can create personal problems, photocopies for their records. is where you’re going to need your documentation. such as being charged for unauthorized phone However, your employer Lists A, B, and C on Form I-9 outline acceptable calls, purchases made on your credit card, or a cannot tell you which specific forms of ID to prove you’re legally allowed to work in poor credit report that keeps you from obtaining documents to present. It’s your this country. Show your employer either one document a loan for a car or home. choice: as long as they appear from List A, or one document each from both List genuine and are on Form I-9’s One of the best ways to protect yourself against B and List C. The documents must be originals, no lists of acceptable documents, identity theft is to store your Social Security copies, except for a certified copy of a birth certificate. your new employer must card in a safe place after you’ve shown it to accept them as proof. your employer. Your employer should also make sure that your Social Security number is only Many employees use their shared with those who need to know it, and that Social Security card together records with your number on them are properly with their driver’s license to destroyed when no longer needed. prove their right to work. QUICK TIP

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 4 you Fill out

On your first day of work, you will need to Form i-9 in-depth Johnson Thomas R fill out Section 1: Employee Information and Attestation. Read the instructions 4567 Elm Street Hometown VA 98765 carefully before completing this form. The instructions must be available during Upon employment, you have to prove 06/30/1965 1 2 3 4 5 6 7 8 9 N/A N/A completion of this form. your identity and right to work in the U.S. Federal law requires employers to make sure they don’t accidentally hire illegal aliens. Your employer will check your documentation to make sure it’s genuine and to be certain that you’re legally allowed to work. Regardless of your nationality, your employer will want to review your documents within three days of your first day of work.

Thomas R. Johnson 03/26/2014

Download a current copy of Form I-9 from the U.S. Citizenship and Immigration Services website. AmericAn PAyroll AssociAtion 5 Johnson, Thomas R. show documentAtion

Driver License Social Security Card This is where you’re going to need to Form i-9 in-depth Commonwealth of Virginia Social Security Administration present your documentation. Show your 987-987654 123-45-6789 employer either one document from List A, or one document each from both List B and 06/30/2016 Upon employment, you have to prove List C (see next page). your identity and right to work in the U.S. Federal law requires employers to make sure they don’t accidentally hire illegal aliens. Your employer will check your documentation to make sure it’s genuine and to be certain that you’re legally allowed to work. Regardless of your nationality, your employer will want to review your documents within

three days of your first day of work. 03/26/2014

Michael Abernathy 03/26/2014 President Abernathy For emPloyer Michael Mike's Sporting Goods 123 Elm Street Hometown VA 98765

Your employer will certify that they have “examined the documents presented” by you and that they “appear to be genuine and to relate to the employee named.” Tip: It’s your choice which documents you present. Download a current copy of Form I-9 from the U.S. Citizenship and Immigration Services website. AmericAn PAyroll AssociAtion 6 lists of AccePtAble documents*

List A OR List B AND List C documents thAt estAblish both identity documents thAt estAblish identity documents that establish employment authorization And emPloyment AuthorizAtion Driver’s license or ID card issued by a State or outlying possession Social Security Account Number card U.S. Passport or U.S. Passport Card of the United States provided it contains a photograph or information unless the card says it is not valid for such as name, date of birth, gender, height, eye color and address employment or is valid for employment only with INS or DHS authorization Permanent Resident Card or Alien Registration Receipt Card (Form I-551) ID Card issued by federal, state or local government agencies or entities, provided it contains a photograph or information such as Certification of Birth Abroad issued by the name, date of birth, gender, height, eye color and address Foreign passport that contains a temporary I-551 Department of State (Form 545) stamp or temporary I-551 printed notation on a ma- chine-readable immigrant visa School ID card with photo Military dependent’s ID card Certification of Report of Birth issued by the Department of State (Form DS-1350) Employment Authorization Document that contains a Voter’s registration card Native American tribal document photograph (Form I-766) Original or certified copy of birth certificate U.S. Military card or draft record issued by a State, county, municipal author- In the case of a nonimmigrant alien authorized to ity, or territory of the United States bearing work for a specific employer incident to status, a an official seal foreign passport with Form I-94 or Form I-94A bearing U.S. Coast Guard Merchant Mariner Card the same name as the passport and containing an endorsement of the alien’s nonimmigrant status, as Driver’s license issued by a Canadian government authority Native American tribal document long as the period of endorsement has not yet expired and the proposed employment is not in conflict with For Persons under Age 18 unAble to Present A document listed Above: U.S. Citizen ID Card (Form I-197) any restrictions or limitations identified on the form

School record or report card Identification Card for Use of Resident Citizen Passport from the Federated States of Micronesia in the United States (Form I-179) (FSM) or the Republic of the Marshall Islands (RMI) Clinic, doctor or hospital record with Form I-94 or Form I-94A indicating nonimmigrant admission under the Compact of Free Association Employment authorization document issued Between the United States and the FSM or RMI Day-care or nursery school record by the Department of Homeland Security

AmericAn PAyroll AssociAtion *All documents must be unexpired. Illustrations of many of these documents appear in Part 8 of the Handbook for Employers (M-274) 7 PAying your FAir shAre, out of your paycheck, you can write DID YOU conditions for clAiming PArt 1: Form w-4, emPloyee’s that in on this form. Form W-4 is also KNOW? withholding AllowAnce certiFicAte used to claim a total exemption from withholding AllowAnces federal income tax withholding. More Form W-4, Employee’s Withholding on that later. Allowance Certificate, must be You can claim an allowance for: Someone else (a spouse submitted either on or before the first whAt Are withholding AllowAnces? or parent) will list you as a dependent on their income day of work. The information on the The more withholding allowances tax return. W-4 will be used to calculate how YOURSELF you can claim, the less withheld in much money will be withheld in federal federal income tax each pay period. income tax from your paycheck. This is why submitting your W-4 is Submit this form to your employer right so important! Until you turn this form away. If you put it off, your employer in, your employer has to assume Unless... will withhold the maximum amount of that you are single and claiming zero tax from your paycheck! In addition, if Your spouse is withholding allowances. With zero your living situation changes, you may working and has allowances, you’re likely to pay more need to file a new W-4. already claimed an tax than is necessary. Although you YOUR allowance on their SPOUSE whAt’s the PurPose oF this Form? will receive a tax refund for the extra W-4. tax when you file your personal income Form W-4 tells your employer how tax return, there is no good reason much federal income tax to deduct to give the federal government an Your spouse has from each paycheck. The amount EACH CHILD interest-free loan of your hard-earned already claimed YOU LIST AS A withheld is based on your marital money. The conditions for claiming each child on their DEPEnDEnT On status (married or single), and on the W-4. withholding allowances are listed here YOUR TAx RETURn number of withholding allowances you and on the next page. claim (see next section). If you want an extra, specific dollar amount taken

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 8 Each individual in the family can be claimed only one time by one other AllowAnces You Might clAim person to gain a withholding allowance. AllowAnces child tAx credits As oF 2014 AllowAnces

1. If you are single, and 1. If you have less than 3 eligible children, and 2. You are single, and x number of eligible children 2. You have only one job 1 2 3. Your total income is less than $65,000 1. If you are married, and 2. You have only one job, and 1 1. If you have less than 3 eligible children, and 2. You are married, and x number of eligible children 3. Your spouse doesn’t work 2 3. Your total income is less than $95,000 1. If you are married, and 2. You have only one job, and 1. If you have 3 – 6 eligible children, and 1 2. You are single, and x number of eligible children - 3. Your spouse has a job making $1,500 or less 2 1 3. Your total income is less than $65,000 1. If you are married, and 2. You have a second job making $1,500 or less,and 1. If you have 3 – 6 eligible children, and 1 2. You are married, and x number of eligible children - 3. Your spouse doesn’t work 2 1 3. Your total income is less than $95,000 1. If you are married, and 1. If you are single, and 2. You have a second job making $1,500 or less,and x number of eligible children 1 2. Your total income is between $65,000 and $84,000 1 3. Your spouse has a job making $1,500 or less 1. If you are married, and 1. If you are single, and x number of eligible children 2. Your total income is between $95,000 and $119,000 2. You are filing as head of household (i.e., paying 1 more than half the cost of maintaining a home 1 for yourself and your dependent[s]) 1. If you have 7 or more eligible children, and 2. You are single, and x number of eligible children - 2 2 1. If you spend at least $2,000 per year in 3. Your total income is less than $65,000 out-of-pocket childcare expenses (not child support payments), and 1 1. If you have 7 or more eligible children, and 2. You are married, and x number of eligible children - 2. You intend to claim a credit for this on your 2 2 income tax return 3. Your total income is less than $95,000

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 9 You can use the W-4 Personal Allowances Cut the form where indicated and keep the so, how does this work in reAl liFe? Worksheet to calculate additional allowances. top portion for your own records. The top Let’s use Tom and his wife as an example. These allowances are based on deductions portion explains how you determined the Tom’s wife works outside the home and they for interest on your home mortgage, number of withholding allowances. have two children under age 17 living with contributions you made to charities, state Attention nonresidents! them. His wife claims an allowance for herself and local taxes, some medical expenses, on her W-4. Together, they’ll spend $8,000 and various other deductions you might have If you’re a nonresident alien—that is, if you’re out-of-pocket on childcare this year. They don’t taken, see Form W-4 for details. here from another country and don’t have a itemize their deductions, and their combined To determine total allowances, use the green card—you can claim only one withholding earnings for the year are $75,000. Tom claims worksheet on Form W-4 (the information allowance. This holds true unless you come one allowance for himself, one for each child, above is repeated there). Do not ask your from Canada, Mexico, or the Republic of one for childcare expenses, and four for the employer how many allowances you should Korea, in which case you can claim as many Child Tax Credit. The W-4 Tom submitted to his claim. If you need help: allowances as apply to you. All nonresident employer is shown on the next page. aliens must also write “NRA” or “Nonresident • Get a copy of IRS Publication 505, Tax Alien” above the dotted cAn you clAim to be exemPt From FederAl income tAx Withholding and Estimated Tax, from your line on Line 6 of Form withholding? employer W-4 because of Is it possible for you to have no federal • Call the IRS at 800-TAX-FORM (829-3676) special withholding income tax withholding at all? It’s possible • Download a W-4 from the IRS website rules for that you qualify, but not very likely. You can You can also calculate what your income tax nonresident claim to be exempt from federal withholding withholding and take-home pay will be by aliens. only if both of the following conditions apply: going to the national Payroll Week website 1. You ended up owing no federal income and plugging in your W-4 information. tax last year, and all the federal tax You should provide your employer with only withheld from you during the year was the bottom portion of Page 1 of your W-4. given back after you filed your return, and

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 10 The exceptions do not apply to supplemental wages Nonwage income. If you have a large amount of Form W-4 (2014) greater than $1,000,000. nonwage income, such as interest or dividends, Basic instructions. If you are not exempt, complete consider making estimated tax payments using Form Purpose. Complete Form W-4 so that your employer the Personal Allowances Worksheet below. The 1040-ES, Estimated Tax for Individuals. Otherwise, you can withhold the correct federal income tax from your worksheets on page 2 further adjust your may owe additional tax. If you have pension or annuity pay. Consider completing a new Form W-4 each year withholding allowances based on itemized iincome, see Pub. 505 to find out if you should adjust and when your personal or financial situation changes. deductions, certain credits, adjustments to income, your withholding on Form W-4 or W-4P. Exemption from withholding. If you are exempt, or two-earners/multiple jobs situations. Two earners or multiple jobs. If you have a complete only lines 1, 2, 3, 4, and 7 and sign the form Complete all worksheets that apply. However, you working spouse or more than one job, figure the instructions to validate it. Your exemption for 2014 expires may claim fewer (or zero) allowances. For regular total number of allowances you are entitled to claim February 17, 2015. See Pub. 505, Tax Withholding wages, withholding must be based on allowances on all jobs using worksheets from only one Form and Estimated Tax. you claimed and may not be a flat amount or W-4. Your withholding usually will be most accurate percentage of wages. when all allowances are claimed on the Form W-4 Note. If another person can claim you as a dependent for the highest paying job and zero allowances are Read the instructions carefully. It is on his or her tax return, you cannot claim exemption Head of household. Generally, you can claim head claimed on the others. See Pub. 505 for details. from withholding if your income exceeds $1,000 and of household filing status on your tax return only if includes more than $350 of unearned income (for you are unmarried and pay more than 50% of the Nonresident alien. If you are a nonresident alien, your responsibility to submit accurate example, interest and dividends). costs of keeping up a home for yourself and your see Notice 1392, Supplemental Form W-4 dependent(s) or other qualifying individuals. See Instructions for Nonresident Aliens, before Exceptions. An employee may be able to claim completing this form. information on your W-4. Your employer exemption from withholding even if the employee is a Pub. 501, Exemptions, Standard Deduction, and dependent, if the employee: Filing Information, for information. Check your withholding. After your Form W-4 takes effect, use Pub. 505 to see how the amount you are will not review it for you. • Is age 65 or older, Tax credits. You can take projected tax credits into account in figuring your allowable number of withholding allowances. having withheld compares to your projected total tax in-depth Credits for child or dependent care expenses and the child for 2014. See Pub. 505, especially if your earnings Form w-4 • Is blind, or tax credit may be claimed using the Personal Allowances exceed $130,000 (Single) or $180,000 (Married). • Will claim adjustments to income; tax credits; or Worksheet below. See Pub. 505 for information on Future developments. Information about any future itemized deductions, on his or her tax return. converting your other credits into withholding allowances. developments affecting Form W-4 (such as legislation enacted after we release it) will be posted at www.irs.gov/w4. Personal Allowances Worksheet (Keep for your records.) Let’s use Tom and his wife as an 1 A Enter “1” for yourself if no one else can claim you as a dependent ...... A your worksheet example. Tom’s wife works outside • You are single and have only one job; or B Enter “1” if: { • You are married, have only one job, and your spouse does not work; or } . . . B the home and they have two children • Your wages from a second job or your spouse’s wages (or the total of both) are $1,500 or less. You can use the W-4 worksheet to C Enter “1” for your spouse. But, you may choose to enter “-0-” if you are married and have either a working spouse or more under age 17 living with them. His wife than one job. (Entering “-0-” may help you avoid having too little tax withheld.) ...... C calculate additional allowances. These D Enter number of dependents (other than your spouse or yourself) you will claim on your tax return ...... D 2 allowances are based on deductions claims an allowance for herself on her E Enter “1” if you will file as head of household on your tax return (see conditions under Head of household above) . . E F Enter “1” if you have at least $2,000 of child or dependent care expenses for which you plan to claim a credit . . . F 1 for interest on your home mortgage, W-4. Together, they’ll spend $8,000 (Note. Do not include child support payments. See Pub. 503, Child and Dependent Care Expenses, for details.) contributions you made to charities, state G Child Tax Credit (including additional child tax credit). See Pub. 972, Child Tax Credit, for more information. out-of-pocket on childcare this year. • If your total income will be less than $65,000 ($95,000 if married), enter “2” for each eligible child; then less “1” if you and local taxes, some medical expenses, have three to six eligible children or less “2” if you have seven or more eligible children. and various other deductions you might They don’t itemize their deductions, • If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” for each eligible child . . . G 4 H Add lines A through G and enter total here. (Note. This may be different from the number of exemptions you claim on your tax return.) ▶ H 8 have taken. and their combined earnings for the • If you plan to itemize or claim adjustments to income and want to reduce your withholding, see the Deductions For accuracy, and Adjustments Worksheet on page 2. year are $75,000. Tom claims one complete all • If you are single and have more than one job or are married and you and your spouse both work and the combined worksheets earnings from all jobs exceed $50,000 ($20,000 if married), see the Two-Earners/Multiple Jobs Worksheet on page 2 to allowance for himself, one for each that apply. { avoid having too little tax withheld. • If neither of the above situations applies, stop here and enter the number from line H on line 5 of Form W-4 below. you keeP child, one for childcare expenses, and Separate here and give Form W-4 to your employer. Keep the top part for your records. four for the Child Tax Credit. Employee's Withholding Allowance Certificate OMB No. 1545-0074 Form W-4 ▶ You should provide your employer with only Department of the Treasury Whether you are entitled to claim a certain number of allowances or exemption from withholding is subject to review by the IRS. Your employer may be required to send a copy of this form to the IRS. 14 Internal Revenue Service 20 the bottom portion of Page 1 of your W-4. 1 Your first name and middle initial Last name 2 Your social security number Thomas R Johnson 123-45-6789 Cut the form where indicated and keep the Home address (number and street or rural route) 3 Single Married Married, but withhold at higher Single rate. top portion for your own records. The top 4567 Elm Street Note. If married, but legally separated, or spouse is a nonresident alien, check the “Single” box. City or town, state, and ZIP code 4 If your last name differs from that shown on your social security card, portion explains how you determined the Hometown, VA 98765 check here. You must call 1-800-772-1213 for a replacement card. ▶ number of withholding allowances. 5 Total number of allowances you are claiming (from line H above or from the applicable worksheet on page 2) 5 8 you Fill out 6 Additional amount, if any, you want withheld from each paycheck ...... 6 $ 7 I claim exemption from withholding for 2014, and I certify that I meet both of the following conditions for exemption. • Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and Using the Personal Allowance Worksheet, • This year I expect a refund of all federal income tax withheld because I expect to have no tax liability. If you meet both conditions, write “Exempt” here ...... ▶ 7 Download a current copy Tom was able to determine that he could claim Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete. eight allowances: one for himself, one for each of Employee’s signature of Form W-4 from the IRS ▶ Thomas R. Johnson Date ▶ 3/26/2014 his two children, one for childcare expenses, (This form is not valid unless you sign it.) 8 Employer’s name and address (Employer: Complete lines 8 and 10 only if sending to the IRS.) 9 Office code (optional) 10 Employer identification number (EIN) website. and four for the Child Tax Credit. For Privacy Act and Paperwork Reduction Act Notice, see page 2. Cat. No. 10220Q Form W-4 (2014) AmericAn PAyroll AssociAtion 11 2. You don’t expect to owe any federal dependent moves out of the house, you’re Your employer might ask income tax for the current year. required to submit a new W-4 showing the that you submit your W-4 reduced number of allowances. by telephone or computer. You have to renew your claim to an exemption 2. You realize that you’re no longer If you want to use the each year by February 15. If you don’t, your exempt from federal income tax paper form instead, your employer will start withholding federal tax from withholding because you’re going to QUICK TIP employer has to tell you your paychecks as if you were single and had have to pay income tax in the current how to get one, and where zero withholding allowances, unless there is a year; you’re required to submit a new you should submit it. W-4 in your personnel file that doesn’t claim a W-4 showing you do not claim exempt. total exemption from withholding. Submit a new You can file a new W-4 if either of the two If your name changes, you should submit a W-4 to your employer to renew your claim. examples below applies to you, but you new W-4 to your employer, but only after you Almost no one is exempt from Social Security don’t have to. You really should though, have received your new Social Security card. or Medicare tax. A claim of exempt status because if you do you’ll have more take- You are not allowed to make changes to your won’t affect your Social Security or Medicare home pay! W-4 in advance. Suppose, for instance, that tax withholding. 1. Your living arrangement or financial you’re planning to get married. You have to when do i hAve to submit A new w-4? situation changes, resulting in more wait until after the wedding to submit a new withholding allowances. For example, if form with your updated marital status. If either of the two situations below applies you or your spouse gives birth to a child, or Your employer also has responsibilities with to you, you have 10 days to fill out and if a working spouse quits their job, you can regard to the W-4. By December 1 of each submit a new W-4 to your employer. claim an extra allowance. You can turn in a year, your employer should remind you to turn 1. Your living arrangement or financial new W-4 reflecting this change at any time. in a new form for the next year if your marital situation changes, resulting in fewer 2. You realize that you’re now exempt status or number of allowances has changed. withholding allowances. For example, from federal income tax withholding. Your employer is also required to start using if you get a divorce, or a previously You can turn in a new W-4 reflecting this any new W-4 you turn in within a month of nonworking spouse takes a job, or a change at any time. receiving it from you.

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 12 whAt iF my emPloyer reJects my w-4? • Changing the text of the form, either If you submit an unacceptable W-4, you It is your responsibility to submit accurate by crossing out parts of it or adding ought to fill out a new one. If you don’t, and information on your W-4. Your employer statements to it. you’re a new employee, your employer will will not review it for you. If your W-4 has • Using the form to request that a flat have to assume that you are single and obvious problems, though, your employer dollar amount of tax or a certain have zero withholding allowances. If you’re won’t accept it. percentage of your wages be withheld not a new employee, your employer will — this is illegal! Federal income tax is keep using your most recent W-4 on file. Any one of the following faults will cause calculated on the basis of your withholding Either way, you could easily end up paying your W-4 to be rejected: allowances and marital status. more in taxes than you have to! • Telling your employer that some of the information on the form is false.

wArning! you’re not Quite there yet! students Are not AutomAticAlly exemPt! Even if this definition applies to you, you High school and college students have still may not be exempt from federal income to meet the conditions above to claim an deFinition oF “no FederAl income tAx liAbility” tax withholding. You are not exempt if: exemption. • Your income for the year is more than You had no federal income tax liability for a don’t commit A FederAl oFFense $1,000 and includes over $350 of year only if all the federal income tax withheld unearned income (e.g., interest and It is a federal offense to make false claims from your pay was refunded to you. dividends), and on your W-4 in the hope of reducing your • Someone else is claiming you as a federal taxes. If you’re found guilty of it, dependent. the punishment can be severe.

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 13 PAying your FAir shAre, PArt 2: Residents of these areas may have to fill out stAte emPloyee withholding AllowAnce separate forms for these local taxes, too. certiFicAtes The states that don’t have an income tax are Go online Forty-one states have state income taxes. Alaska, Florida, Nevada, New Hampshire, These taxes, like federal income tax, are South Dakota, Tennessee, Texas, Washington, withheld directly from employees’ paychecks. and Wyoming. You can check the IRS website Access forms and more If you live in one of these states, you might at any time for the most current list of states information on what you learned have to fill out yet another without a state income tax. in Chapter 1: form: a state withholding • Form I-9, Employment allowance certificate. Eligibility Verification If you’re lucky, your state will let your • Form W-4, Employee’s employer use Withholding Allowance the federal W-4 Certificate to calculate • Identity theft state income tax withholding. • Apply, replace, and/or correct Otherwise, your your Social Security card employer will supply • Local Social Security you with the state Administration offices form to fill out. Some • national Payroll Week counties, cities, and website school districts also withhold income tax.

AmericAn PAyroll AssociAtion chAPter 1 • when you get A job 14 in this chAPter

Getting Paid: How, how often, direct deposit, check, or payroll card, and what happens if you leave your job. The Wage and Hour Law: Exempt or nonexempt? Plus, overtime pay, regular rate of chAPter 2 PAycheck bAsics pay, how to handle tips, and defining a workweek.

Plus Which states let your employer require direct deposit, calculating gross pay. AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 15 chApter 2 PAycheck bAsics

getting PAid how oFten will i get PAid? your employer must make arrangements with getting PAid How often you are paid depends on the state a bank where you can cash your paychecks A paycheck is very important to all of us. you work in and the company you work for. for face value. A growing number of companies So it’s important to understand how and In all cases, you have to be paid on your also use electronic “paycards” to pay some when we’re paid. And, how do you know employer’s set payday, and within a certain employees, especially those without bank it’s correct, especially if you’re working number of days after each pay period ends. accounts. Paycards are “stored value” debit overtime or making tips. Read on for You can be paid once a month, twice a month, cards that can be used like cash. more details. every two weeks, or every week. Employers whAt is direct dePosit And how cAn it beneFit me? can pay you more often than the state law requires. For example, if the state says you If you use direct deposit, your wages are have to be paid at least once every two weeks, paid directly into your checking or savings your employer can pay you once every week account. You won’t receive a paycheck on instead. On the flip side, your employercan’t payday, and you won’t need one—your pay you less often than state law requires. money will already be in your account! You will, however, receive a statement that is how will i get PAid? very much like a regular pay stub. Your You’ll probably be paid by check or direct statement will show: the pay period dates, deposit (more on this below). In most states, the date of payment, how many hours you worked, your before- and after-tax wages,

AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 16 any taxes subtracted from your check, In some states, employers can require that and any other deductions. And, as long as you use direct deposit. See the chart on Many employees prefer employees can print them out, all states now the next page for more information. direct deposit to receiving allow companies to provide these statements Even if you live in a state where you have a paycheck. You too might through their computer network rather than to use direct deposit, your employer can’t find it more convenient, on paper. require you to deposit your wages in a QUICK TIP and safer: You must first give your employer specific institution. You get to choose the permission to use direct deposit. Your financial institution, and which account. In 1. You won’t have to wait around for your wages are transferred electronically into some states, if you can’t use direct deposit check on payday! your account and your employer can only because you don’t have a bank account, your arrange this with your permission. Some employer can require you to receive your pay 2. If you miss work on a payday, your states require that you give this permission through an electronic paycard. money’s in the bank automatically. in writing; in other states, you can just tell whAt iF i Quit, or i’m lAid oFF? 3. You won’t have to worry about losing a your employer what you want. Typically, paycheck or having it stolen. you’ll be asked to provide a checking If you are leaving your job—including quitting, account deposit slip or a voided check, both being laid off, or fired—you should receive 4. Your money will start earning interest as of which contain the following necessary your final paycheck on your last day of work, soon as it’s deposited into your account. information: or by the next payday. Individual state laws 5. You may have portions of your pay sent • The name of your financial institution determine exactly how quickly you’ll get your to several separate accounts, which can (bank, credit union, etc.) and its transit last check and specify if any extra payments save you time and grow your savings routing number. (e.g., vacation pay) need to be included in account automatically. • Whether you want the deposits made to a your final paycheck. checking or a savings account. • Your account number.

AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 1717 DID YOU In some states, employers direct dePosit From coAst to coAst can require that you use KNOW? direct deposit.

stAtes where emPloyers cAn reQuire direct dePosit In these states, employers can require direct deposit: stAtes where emPloyers cAn reQuire direct dePosit in sPeciAl cAses Alabama North Carolina Indiana North Dakota Kansas Ohio Kentucky Oklahoma Louisiana Oregon Maine South Carolina Massachusetts South Dakota Mississippi Tennessee Missouri Texas Nebraska Wisconsin

In these states, employers may require direct deposit:*

Alaska Michigan Arizona Minnesota Arkansas New Mexico Florida Utah Hawaii Virginia Illinois Washington Iowa Wyoming Maryland

*For certain groups of employees, e.g., new hires, government employees. AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 18 the wAge And hour lAw, or, how do you know whAt is ‘exemPt’ And ‘nonexemPt’ emPloyee stAtus? exemPt your PAycheck is correct? Under the Fair Labor Standards Act, employees The most common exempt employees: If you’re classified as what is known as a are classified as exempt or nonexempt based on the kind of work they do and the salary they “nonexempt” employee, you’re covered by the • “White collar,” Exempt federal Fair Labor Standards Act, the U.S.’s main are paid. If you’re an exempt employee, you’ll such as executives, wage and hour law that requires, among other things, probably be paid a set salary that is typically administrators, an employer to pay you at least minimum wage higher than what you’d be earning at minimum professionals, computer professionals, plus a certain overtime rate. If you aren’t covered by wage. The Fair Labor Standards Act does not and outside sales. cover exempt employees. the federal law because your employer is too small, • Work on commission in retail and service The Fair Labor Standards Act does, however, you may be protected by one of the states that have industry sales. passed their own laws on minimum wages and cover nonexempt employees. If you’re overtime pay. If you ever find yourself nonexempt, you have to be paid at least the • Work for the government such as elected covered by both a federal and a minimum wage for all the hours you work, officials and their appointees, and state state law, your employer has to and extra overtime pay if you work more than and local legislative positions. obey the law that’s more favorable 40 hours in a single workweek. Nonexempt Many other kinds of employees are also to you, the employee. For example, employees can be paid a set salary though you exempt from the Fair Labor Standards suppose your state has its still need to be paid the required minimum wage Act. It’s your employer’s task to determine own minimum wage. If this and overtime pay. To check, divide your weekly whether or not you’re exempt, based on your wage is higher than the salary by the number of hours you work in a salary and job duties. The more responsibility federal minimum wage, your regular week. Compare this hourly rate to the and independent authority you have, the employer has to pay you the minimum wage and overtime requirements to more likely you are to be exempt. higher state wage. find out if you’re being paid what you’re owed. Your status depends on your actual Are you If you’re not sure how you’re classified, duties, not on your job title. ask your employer if you’re an exempt or If you’re an exempt employee and your pay exemPt or nonexemPt? nonexempt employee. is docked for missed time at work—in other

AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 19 words, wages are subtracted from your paycheck— you might become nonexempt. As an exempt employee, you should be paid on a salary basis, Know your Rights meaning you have to be paid your full salary if you do any work at all in a specific workweek. There are Protecting your exemPt stAtus limits to Punitive deductions a couple of exceptions to this rule: 1. Suppose you’ve already used up all your If you’re an exempt employee, your employer If you’re a nonexempt employee vacation and sick time and one morning you fall shouldn’t dock your pay for less than a day’s absence and you show up late for work, down and twist your ankle. You can’t drive, so from work, except for leave under the Family and your employer can subtract you miss a few more days at work. Since you Medical Leave Act. If your employer does this, you’re the amount of work time you haven’t got any leave left, your wages can be not being treated as an exempt employee. You might missed from your wages. Some reduced for the extra days you missed. become nonexempt as a result, which means you’d employers like to take out 2. If you take time off under the Family and Medical have to be paid for any overtime that you work. If even more as a punishment Leave Act, your pay can legally be docked. you’re out for less than a day and you have some for being late. But know your paid leave time available, your employer can require rights: Punitive deductions Special rules apply to state and local government you to use the paid leave time without converting cannot result in being paid less employees. As “public servants,” they’re often held your status to nonexempt. than minimum wage for each to stricter schedules than employees of private hour you did work, nor can From time to time, you might have to leave work companies. In some areas, the law requires that they result in being paid less temporarily because of jury duty, service as a witness their wages be docked for any absences from overtime than you’ve earned. in a court of law, or military obligations. Your wages work, even absences that last less than a full can’t be reduced as a result of any such service day. Because of this, a state or local government that lasts less than a week, as long as you do some can close some of its offices or reduce its staff work during that week. If you’re paid for this service, temporarily to save money. This is called a though, your employer can subtract the amount you “furlough.” During a furlough, the government can were paid from your regular paycheck.

AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 20 dock the paychecks of exempt employees basis as long as you’re getting at least the who aren’t working. These employees are minimum hourly rate. DID YOU cAlculAting still exempt, except during the period of KNOW? If the minimum wage changes during your your gross PAy time they’ve been told not to show up at workweek, you must be paid at least the their jobs. In the private sector, exempt new minimum wage for all hours worked employees can only be put on furlough for beginning on the day the change takes Gross pay is your total pay before any taxes full workweeks, or they will be treated as effect. are taken out per week, if you’re receiving the nonexempt. federal minimum wage: Because of the taxes subtracted from nonexemPt your paycheck each pay period, and / James works 35 hours or “noncash wages” such as room and each week at the Town and The current federal board, your take-home pay may end up Country Bike Shop. He is minimum wage is being below the minimum wage. But how, paid the federal minimum $7.25 per hour. If and why? Your employer is required by wage of $7.25 per hour. you’re nonexempt, law to withhold Social Security, Medicare, James’ gross pay for each you have to be Non-Exempt and income taxes from your paycheck. week is 35 x $7.25, or $253.75. paid at least this Even though these taxes are subtracted much per hour from your wages, they’re still considered for every hour you work. part of your income, as are any noncash This holds true unless you’re a new $7.25 wages. If you add all the taxes and employee under the age of 20, in which x 35 noncash wages back into your take-home case you only have to be paid $4.25 per pay, your total pay should equal at least $253.75 hour for your first 90 days of work. After the minimum wage rate multiplied by the – Social Security taxes! that, however, your employer has to pay number of hours worked. – Medicare taxes! you the standard minimum wage. As a – Income taxes! nonexempt employee, you can be paid on a piecework, salary, hourly, or commission $200.00

AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 21 whAt is ‘regulAr rAte oF PAy’? Some Examples the Following PAyments Are included in your regulAr rAte oF PAy Rate of Pay nondiscretionAry bonuses bAck PAy AwArds your regulAr rAte oF PAy hAs to be These are bonuses that you and your If you earned wages earlier that you weren’t At leAst the minimum wAge employer have agreed on in advance and paid for at the time, you may receive a “back are awarded based on how well you do pay award.” This requires your employer to iF you’re PAid... your regulAr rAte oF PAy is your job. pay you the back wages you’re owed.

by the hour your hourly wage shiFt Premiums on-cAll PAy

If you work a difficult shift, like a late night If your employer requires you to wait in a shift, a set amount may be added to your specific place to receive a call, or severely a salary your salary divided by hourly rate. This is also known as a “shift limits your personal use of time spent while the number of hours differential.” waiting for a call, you should be paid for this you work in a normal “on-call” time. workweek noncAsh PAyments cost-oF-living AdJustments

by piecework your earnings divided Sometimes an employer will provide This kind of hike in wages is given when an employees with noncash wages like room employer raises employees’ pay to keep up or on by the hours you and board. These “noncash wages” are with inflation. commission worked to get them included in your regular rate of pay by estimating their cost in cash.

AmericAmericAAnn PPAAyrollyroll AssociAssociAAtiontion chAPter 2 • PAychec K bAsics 2222 $7.25 whAt is A workweek? x 35 which is just above how Are tiPs hAndled? $253.75 the minimum—but this Your employer calculates your wages doesn’t get her employer Some employees, such as waitresses and separately for each workweek. A workweek - 247.00 off the hook. She should bartenders, earn tips in addition to their regular is a seven-day period set by your employer have received at least wages. To be classified as a “tipped employee,” $6.75 the minimum rate for and can start on any day of the week, at any you have to earn at least $30 per month in tips. each week she worked. hour of the day. Different workweeks can be Her employer broke the Employers have to pay a tipped employee only established for different groups of employees law her first week by $2.13 per hour, as long as the employee’s tips all working for the same employer. paying her less than average out to at least $5.12 per hour: minimum wage. The workweek at the All-Night Coffee Shop $2.13 + $5.12 = $7.25, the required minimum runs from 5 a.m. Tuesday morning to 5 a.m. wage the next Tuesday. The boss set it up this way so that the late-night shifts (which end at 5 This $5.12 is called the employer’s “tip credit.” a.m.) and the early morning shifts (which If an employee’s tips don’t quite bring his or begin at 5 a.m.) can be handled more easily. her pay up to minimum wage, the employer This kind of workweek is legal under the Fair has to raise the hourly rate to make sure the Labor Standards Act. employee gets at least the minimum rate. The minimum wage requirement must be Service charges added to customers’ bills met for each workweek. Your employer can’t mAryAnne aren’t tips. They’re part of a tipped employee’s average out your wages over a period longer regular wages. than a week. PAID rePorting your tiPs Suppose Maryanne is paid $247 for a single

workweek of 35 hours. This is $6.75 less MINIMUM WAGE In most situations, if you get more than $20 than the minimum rate. $253.75 per month in tips you have to report this

Maryanne works 35 hours again the next $7.25 + 262.00 income to your employer. Federal income, workweek, and is paid $262. This is $8.25 x 70 Social Security, and Medicare taxes will be above the minimum. If you average her $515.75 pay for those two weeks, you get $254.50, $507.50 withheld from your tips. If you earn less than

AmericAn PAyroll AssociAtion chAPter 2 • PA ychecK bAsics 23 $20 per month in tips, you don’t have to report this income to your employer. These tips are still a part of your income, though, and you have to report them when you file your tax return. Know your Rights how does overtime PAy work? If you’re nonexempt, you’ll receive overtime pay for all tiP credits — how do they work? hours over 40 that you work in a specific workweek. Your If your employer wants to take advantage of the tip credit, and pay you employer must pay you 1.5 times your regular rate of pay only $2.13 per hour, all of the following conditions must be met: for each of your overtime hours. There is one exception to this rule: state and local government employees can be 1. You have to average at least $5.12 in tips per hour for each given 1.5 hours off for each hour of overtime they worked in workweek. place of overtime pay. 2. Your employer has to explain the tip credit to you before taking it.

how to Figure your overtime PAy 3. You have to be allowed to keep all the tips you earn, though your employer can require tipped employees to pool their tips. Michael earns $13 per hour. Usually he works only 40 hours per 4. Your employer has to give you all your credit card tips by the next week, but last week he worked 48. How much should he be paid payday. The credit card company’s charge for using the card can be for last week’s work? subtracted from each tip.

Suppose one of your customers puts a $10 tip for you on his or her Regular earnings: 40 hours x $13 = $520 credit card bill. The credit card company charges your employer 5% Overtime hours: 48 hours – 40 hours = 8 hours to use its credit cards. You have to be paid at least 95% of the tip, or Overtime pay: $13 x 1.5 x 8 = $156 $9.50 ($10 x .95 = $9.50).

Last week’s earnings: $520 (regular earnings) 5. Your employer can’t raise the tip credit for any overtime hours you + $156 (overtime pay) = $676 work. In other words, your regular wage has to go up for overtime hours.

AmericAn PAyroll AssociAtion chAPter 2 • PAychecK bAsics 24 when overtime hAs to be PAid Employers do not have to pay you the overtime The Fair Labor Standards Act says you have to receive rate—though many do—when you work overtime pay but only for hours you actually worked. weekends or holidays, unless your work on Go online You won’t get the overtime rate on sick pay, vacation those days actually pushes you over 40 hours pay, etc., unless that’s your employer’s policy. for the workweek. Also, overtime is not based on the number of hours you work in a single Joe is paid for 48 hours of work, but eight of Access forms and more those hours are covered by sick pay. Joe doesn’t day. If you work more than eight hours in a information on what you learned receive the overtime rate for any of those hours, single day, you won’t receive overtime pay for in Chapter 2: because he physically worked only 40 hours. the extra hours. But, you do earn overtime pay • Fair Labor Standards Act, Bonnie is a carpenter. She shows up at her work when you work more than 40 hours in a single site one morning during a thunderstorm. She workweek. from the Department of Labor waits an hour for the rain to let up, but it just Wage and Hour Division. gets worse and her employer sends her home. the workweek And overtime PAy: She is paid for half a day of work. The hour she • Family and Medical Leave waited is actual work time, but the rest of those When you calculate your overtime pay, Act, also from the Department paid hours are not hours that she physically remember that each workweek stands on its of Labor. worked. She can’t count that time as work hours own. For example, if you work 35 hours one for the purpose of getting overtime pay. week and 45 hours the next, your employer can’t average out these totals (which would be 40 hours) to deny you overtime pay. You Some state laws and union must receive five hours of overtime pay for contracts provide an exception to the extra time you worked during the second this rule by requiring employers week. Firefighters, police officers, and hospital to pay you overtime when you work Sundays, holidays, or more employees, however, often have their workweek QUICK TIP than eight hours in one day. and overtime pay defined differently due to the nature of these jobs.

AmericAmericAAnn PPAAyrollyroll AssociAssociAAtiontion cchhAPAPterter 22 •• PAPAychecychecKK bbAAsicssics 2525 in this chAPter

Income and Employment Taxes: We’ll answer all your questions about what the numbers mean, the terms, and how to calculate your taxes. Social Security Summary: What it is, why, and how. chAPter 3 your PAy stub And tAxes Medicare: What it is and are you eligible? State Unemployment and Disability Insurance Taxes: Some definitions and if they apply in your state.

Plus Learn to how to read your pay stub and how to calculate your withholding tax. AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 26 chApter 3 your PAy stub And tAxes

gGettinettingg sStarted:tArted: income And emPloyment tAxes If you hold a job in the U.S. or you’re a U.S. tTAAxX inINFFOormRMAATItionON citizen working in another country, you have This chapter provides an to pay federal income and employment taxes. explanation of the taxes you Depending on the state in which you live and pay, and methods you can use work, you might be responsible for paying a state to confirm that your employer is income tax as well. Some counties, cities, and withholding the right amount of school districts also have income taxes. Your your wages. employer collects these taxes by withholding part of your paycheck and sends this money directly to the federal, state, and/or local governments.

AmericAmericAAnn PPAAyrollyroll AssociAssociAAtiontion chAPchterAP ter3 • your1 • when PAy youstub get An AD jobtAX es 2723 understAnding Detatch below before depositing. Save for your records.

your Pay period: PAy stub Gross Earnings $2000.00 Dec 2014 gross PAy

When you look at your paycheck Deductions: Your gross pay is the total amount you’ll notice that it’s attached to a of wages you’ve earned for the pay “pay stub.” The pay stub records Federal Income Tax $219.00 period. It’s your regular pay plus any other wages you receive, like overtime the wages you received, the taxes State Income Tax 96.50 pay or bonuses. Your taxes are based collected during that pay period, upon your gross pay. and your “gross pay” and “net Local Income Tax 17.00 pay.” It also shows you exactly how much money was subtracted to pay Social Security 120.90 for federal income tax, state and Medicare 28.28 local income taxes, and the “FICA” (Federal Insurance Contributions Pre-tax Healthcare Plan 50.00 Act) taxes: Social Security and After-tax Deductions 0 Medicare. Your pay stub might also deductions include information about pre- and after-tax deductions. net PAy net Pay $1468.32 Your net pay is the amount of money you receive on payday. It is your “take-home pay.” Net pay equals your gross pay minus all deductions, and all taxes—federal, state, and local.

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 28

whAt Are income tAxes? how Are income tAxes cAlculAted? Federal income tax is the amount Your employer will calculate the DID YOU how to use of money you have to pay to income taxes that are withheld KNOW? wAge–brAcket method the federal government and is from your paycheck. It’s probably the collected by the IRS. There are a good idea for you to check your 41 states that collect state income employer’s math, and verify the Jane is married and is paid a weekly salary of $705. She claims two tax. Depending on where you live, right amount is being withheld. withholding allowances on her W-4. you may also owe income tax to There are several different Look at the “Married Persons-Weekly Payroll the county, city, or school district. methods your employer can use Period” wage-bracket table on page 47 in the 2014 to calculate your federal income Employer’s Tax Guide. In the first two columns find tax. The two most popular are the row for “At least $700” and “But less than $710.” the wage-bracket method and Then look across that row for the number below the the percentage method. Each are column head for “2” withholding allowances claimed. based on the IRS federal income Jane’s federal income tax withholding is $41 per week. tax withholding tables. These tables factor in your marital status (married or single), how often you’re paid (weekly, monthly, Weekly salary: etc.), your gross pay, and the $705 number of withholding allowances you claim on your W-4. State Witholding allowances: 2 and local governments that levy income taxes have their own tax withholding tables for your Federal income tax witholding: employer to use. $41 per week

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 29 mArried Persons — weekly PAyroll Period

(For Wages Paid through December 2014) And the wages And the number of witholding allowances claimed is— are— At least But less 0 1 2 3 4 5 6 7 8 9 10 than The amount of income tax to be withheld is— $ 600 $ 610 $ 49 $ 38 $ 29 $ 21 $ 14 $ 6 $ 0 $ 0 $ 0 $ 0 $ 0 610 620 50 39 30 22 15 7 0 0 0 0 0 620 630 52 41 31 23 16 8 1 0 0 0 0 630 640 53 42 32 24 17 9 2 0 0 0 0 640 650 55 44 33 25 18 10 3 0 0 0 0

650 660 56 45 34 26 19 11 4 0 0 0 0 660 670 58 47 35 27 20 12 5 0 0 0 0 670 680 59 48 37 28 21 13 6 0 0 0 0 680 690 61 50 38 29 22 14 7 0 0 0 0 690 700 62 51 40 30 23 15 8 0 0 0 0

700 710 64 53 41 31 24 16 9 1 0 0 0 710 720 65 54 43 32 25 17 10 2 0 0 0 720 730 67 56 44 33 26 18 11 3 0 0 0 730 740 68 57 46 34 27 19 12 4 0 0 0 740 750 70 59 47 36 28 20 13 5 0 0 0 750 760 71 60 49 37 29 21 14 6 0 0 0 760 770 73 62 50 39 30 22 15 7 0 0 0 770 780 74 63 52 40 31 23 16 8 0 0 0 780 790 78 65 53 42 32 24 17 9 1 0 0 790 800 77 66 55 43 33 25 18 10 2 0 0

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 30 Look at Table 5. Percentage Method—2014 Amount 1 for One Withholding Allowance on page 41 in the 2014 $151.90 how to use the PercentAge method Employer’s Tax Guide. Locate the “Biweekly” Payroll Period. For Brian, this is $151.90.

Brian is married. He is paid $1,900 Multiply the amount of one withholding allowance by the 4 x $151.90 = $607.60 every two weeks (biweekly). He 2 number of allowances Brian claims (four). » claims four withholding allowances on his W-4. Subtract the value of the withholding allowances from 3 Brian’s earnings: $1,900 - $607.60 = $1,292.40. This is the $1,900 – $607.60 = $1,292.40 amount subject to withholding. »

Find the correct Percentage Method Table for Income Tax Withholding for Brian (see page 43 in the 2014 4 Employer’s Tax Guide ). Remember, he’s married and is paid biweekly.

$1,292.40 in the table is “Over $1,023,” “But not 15% of excess over $1,023 + 5 a. over $3,163,” so 15% of the excess over $1,023, $69.80 withheld plus $69.80, is to be withheld.

b. Figure out what the excess over $1,023 is. » $1,292.40 – $1,023 = $269.40 c. Multiply $269.40 by 15% and add $69.80 to get ($269.40 x .15) + $69.80 = Brian’s withholding. » $110.21

The federal income tax withheld each pay period from Brian’s paycheck is $110.21. $110.21

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 31 Table 5. Percentage Method— 2014 Amount for One Withholding Allowance Weekly...... $ 76.00 Biweekly...... 151.90 PercentAge method Semimonthly...... 164.60 Monthly...... 329.20 2014 Amount for Quarterly...... 987.50 one withholding AllowAnce Semiannually...... 1,975.00 Annually...... 3,950.00 Daily or miscellaneous (each day of the payroll period)..... 15.20

TABLE 2—BIWEEKLY Payroll Period (b) MARRIED person (including head of household) — If the amount of wages (after subtracting withholding allowances) The amount of income tax is: to withhold is: Not over $325 ...... $0 Over— But not over— of excess over— PercentAge method tAbles $325 —$1,023 ..... $0.00 plus 10% —$325 for income tAx withholding $1,023 —$3,163 ..... $69.80 plus 15% —$1,023 $3,163 —$6,050 ..... $390.80 plus 25% —$3,163 $6,050 —$9,050 ..... $1,112.55 plus 28% —$6,050 $9,050 —$15,906 ..... $1,952.55 plus 33% —$9,050 $15,906 —$17,925 ..... $4,215.03 plus 35% —$15,906 $17,925 ...... $4,921.68 plus 39.6% —$17,925

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 32 suPPlementAl wAges And other Supplemental wages get special tax The oPtionAl FlAt rAte withholding methods treatment. They include bonuses, For special situations, there are awards, commissions, retroactive withholding method other withholding methods your pay, tips, back pay awards, and severance pay. If your employer separates your supplemental wages employer can use. from your regular wages, they can withhold federal income tax from these payments at the flat rate of 25% in 2014. The 25% rate applies regardless of the withholding allowances you’ve claimed on your W-4, and is independent of what the IRS tables say.

using the FlAt rAte withholding method

You were awarded a $1,000 sales bonus during your last pay period! Your employer would multiply this supplemental wage by 25% (.25) to calculate withholding: $1,000 x .25 = $250. Your employer will withhold $250 in federal income tax from your bonus PAy! $1,000 bonus. $1,000 x .25 $250

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 33 Under this method, your employer will first add your supplemental wages to your last wage The AggregAte payment. They will then figure the income tax on the whole amount, and subtract the tax that was withheld from your last wage payment. The remaining amount is what your employer will withholding method withhold from your supplemental wages.

using the AggregAte withholding method Donna’s employer adds her bonus to her 1 $200 + $1,100 = $1,300 regular wage: Last week Donna was awarded a bonus Using the wage-bracket or percentage method, of $200! 2 her employer figures the withholding on the total Donna is single and wage bracket = $120 amount of $1,300 which would be $120 using claims two withholding the wage-bracket method. allowances on her W-4. She is paid Donna’s employer looks back at her last $1,100 biweekly. 3 regular wage payment of $1,100, and writes wage bracket = $90 Her employer keeps down what amount was withheld from that this bonus separate paycheck which was $90. from her regular wages. To figure 4 Donna’s employer subtracts $90 from $120, i.e., out how much $120 - $90 = $30. $120 - $90 = $30 federal income tax to withhold from Donna’s employer will withhold $30 in federal income tax from her $200 bonus. Donna’s bonus, her employer goes If your employer doesn’t give you a separate paycheck for your supplemental wages, or list them through the following steps. separately on your pay stub, your employer will treat the total amount as one wage payment.

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 34 whAt Are emPloyment tAxes? how Are sociAl security And medicAre tAxes Another AggregAte withholding exAmPle Employment taxes are Social Security and cAlculAted? Medicare taxes, also called FICA (Federal Both Social Security and Medicare taxes are a Mike received a $1,000 bonus Insurance Contributions Act) taxes. All fixed percentage of your wages. Your employer because of his excellent work! employers withhold these taxes from their will withhold 6.2% of your pay for Social Security Mike’s employer combines this bonus employees’ pay. FICA is deducted from your tax, and 1.45% for Medicare That means your with his regular biweekly wages of wages to help you total FICA taxes add up to 7.65% of your wages. $1,100. His total wages for the pay afford your living and The rate your employer period are $2,100. Since Mike’s medical expenses YOUR FICA TOTAL pays is also 6.2% for Social employer doesn’t separate these two later in life. The EMPLOYER’S Security and 1.45% for 6.2% FICA TOTAL kinds of payments, federal income tax Social Security Medicare, for total FICA + 1.45% 6.2% will be withheld from his check as if his wages upon which taxes of 7.65%. regular biweekly wages were $2,100. your taxes are based 7.65% + 1.45% sociAl security wAge limit If you receive supplemental wages are recorded in your 7.65% that total more than $1 million in a individual Social In 2014, any wages you year, the amount over $1 million will Security account. earn above $117,000 are not be taxed at the The money you have earned in your subject to Social Security tax. The most you highest income lifetime will be used to determine your benefits can pay in Social Security tax is $7,254.00 tax rate, which is when you retire, or if you become disabled. ($117,000 x .062). There’s no upper limit on 39.6% in 2014. Your Medicare taxes will provide you with basic Medicare tax. Medicare tax will be withheld from health insurance once you reach 65, or earlier if all wages you receive. If you are paid more than

you become disabled. $200,000, your employer will withhold an extra $1,000 Each pay period, your employer pays the federal 0.9% Medicare tax from the wages above that + $1,100 government an amount of FICA taxes based on amount. $2,100 the wages you are paid. The following two examples show you how to

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 35 Remember, to convert a The sociAl security wAge limit FIRST ExAMPLE percentage into a decimal, divide the percentage by 100: 6.2% = .062 wAges uP to $117,000 Per yeAr 1.45% = .0145 QUICK TIP Another way to remember this, figure out your employment taxes. is to move the decimal point two Richard is paid $500 each week. His Social Security places to the left. withholding per paycheck is $31 ($500 x .062). His Medicare .06.2 tax per pay period is $7.25 ($500 x .0145). Richard’s employer withholds $38.25 ($31 + $7.25) in employment .01.45 taxes from his wages each week. His employer also pays $38.25 (($500 x .062) + ($500 x .0145)) to the federal government.

Also!

If you’re holding down more than one job: SOCIAL EMPLOYER PAYS

Each of your employers is required to withhold SECURITY MEDICARE

Social Security and Medicare taxes from your $500 ($500 x .062) $500 paycheck. You can’t combine your earnings from .062 + ($500 x .0145) x x .0145 your different jobs to see if you’ve hit the Social $38.25 Security wage limit. If you end up paying more $31 $7.25 in Social Security tax than the law allows (more than $7,254.00 in 2014), you can get a refund when you file your income tax return.

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 36 The sociAl security wAge limit SECOnD ExAMPLE

wAges Above $117,000 Per yeAr Calculating Erin’s Social Security tax: 1 Erin figures out how much of her $1,500 check Erin earned $116,400 in taxable is subject to Social Security tax. She does this wages between January 1 and by subtracting the $116,400 she has already $117,000 - $116,400 = $600 December 21, 2014. earned this year from the Social Security wage limit of $117,000, for an amount of $600. On December 22, she is paid another $1,500. She wants She calculates her Social Security tax based on to figure out her employment 2 this $600 only. All her earnings above that are $600 x .062 = $37.20 tax withholding from this latest exempt from this tax. paycheck. $37.20 is how much Erin will pay this pay period in Social Security tax. $37.20

Calculating Erin’s Medicare tax: This is easier, since all of Erin’s wages are subject to Medicare tax. All Erin has $1,500 to do is multiply $1,500 by 1.45% to get her Medicare withholding of $21.75. x .0145 Erin’s share of employment taxes (Social Security + Medicare) on her latest $21.75 paycheck is $58.95 ($37.20 + $21.75). Her employer will also pay $58.95 (($600 x .062) + ($1,500 x .0145)) to the federal government.

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 37 sociAl security summAry medicAre

Your Social Security benefit is a percentage The Centers for Medicare and Medicaid of your earnings averaged over most of your Services administers Medicare, the nation’s working lifetime. If you work for someone largest health insurance program. Medicare else, your employer withholds Social Security provides health insurance to people age 65 and Medicare taxes from your paycheck, and over, and those who have permanent calculates the amount it must pay, sends kidney failure and certain people with those taxes to the IRS, and reports your disabilities. If you have questions about earnings and taxes withheld to the Social eligibility, call the toll free number 1-800-325- Security Administration. 0778 or visit the Medicare website. If you’re self-employed, you pay your own stAte unemPloyment And disAbility Social Security and Medicare taxes when insurAnce tAxes you file your tax return. The IRS will report your earnings to the Social Security Unemployment insurance provides you with Administration. a small income while you look for another There are five major categories of benefits job. A joint federal-state system handles this paid through Social Security and insurance. In most states, only your employer is responsible for paying the federal and SO Medicare: OCIA L SE ECU RI state taxes that support the system. Though ITY • Retirement Y 1-800-MEDICARE if you work in Alaska, New Jersey, or • Disability Pennsylvania, you’re required to pay part • Family benefits of the state unemployment insurance tax. • Survivors Like the other taxes discussed earlier, this tax • Medicare will be withheld directly from your paychecks.

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 38 State disability insurance tax exists in only five states (California, Hawaii, New Jersey, New York, and Rhode Island) and Puerto Rico. If you work in one of these states or Puerto Rico and suffer an Go online injury or illness that’s not related to your work, but keeps you from working, you’ll receive money from Access forms and more a state fund. Both employers and employees pay information on what you learned taxes into this fund. Check your pay stub to find in Chapter 3: the exact amount being withheld. In 2004, California began a Paid Family • States Without a State Leave program that is paid for with employee Income Tax contributions. The rate has been added to the state disability insurance rate. New Jersey and • IRS Percentage Method and Rhode Island now have similar programs. Wage-Bracket Tables for Income Tax Withholding

• Centers for Medicaid and Medicare Services

• Social Security Administration

AmericAn PAyroll AssociAtion chAPter 3 • your PAy stub AnD tAXes 39 in this chAPter

Tax Deferred Retirement Plans: All about Section 401(k), 403(b), and 457(b) plans. Cafeteria Plans: Pre-tax deductions, the cafeteria “menu,” and flexible spending accounts. Medical Savings Accounts: Tax chAPter 4 Pre-tAx deductions benefits and contribution limits. Health Savings Accounts: Saving for medical expenses. Transportation Fringe Benefits: Save $ on the cost of getting to work. Calculating Your Pre-Tax Deductions: The actual math behind your pre-tax deductions. Plus Quick tips, warnings, and online links guide.

American Payroll Association Chapter 4 • PRE-TAX DEDUCTIONS 40 Pre-tAx deductions

whAt is ‘tAx-deFFered’? tAx-deFerred retirement PlAns section 401(k) PlAns 401(k) plans are standard tax-deferred You contribute some of your wages Tax-deferred plans are a great way to save retirement plans. Each payday you contribute a every payday to a tax-deferred plan, and money for your retirement. If you’re going to set percentage of your wages to the plan, on a you’re only taxed on the amount after be taxed anyway when you get the money pre-tax basis. You don’t pay income the deduction (less taxes!). Then, when back at retirement, why defer it? The good taxes on this money you retire (or otherwise use what you’ve news: after retirement, you’ll probably pay until you get it back after put away), you get this money back and income taxes at a lower rate than you did retirement in the form of now you are taxed on the money. You’re while you were working. This means you’ll regular payments. not taxed when you earn the money, still end up paying less income tax on this but you are taxed when you access it, money than you would have without the retirement plan. thus payment of taxes on that amount is Social Security and Medicare deferred, or put off, to a future date, i.e., There are many kinds of tax-deferred retirement DID YOU taxes are withheld from your “tax deferred.” plans. Your employer chooses which one KNOW? contributions. to offer to employees depending on certain State and local government eligibility rules. The three most common employers cannot offer 401(k) plans are the Section 401(k) plan, the plans to their employees unless Section 403(b) plan, and the Section the plan has been around since 457(b) plan. before 1986.

AmericAan PAayroll AssociAation cChAPapter 4 • PreRE-tTAX DeEDDUuctionsCTIONS 4041 whAt’s Your PlAn?

401(k) 403(b) 457(b)

contribution limits of contributions by you and your employer simPle PlAns Employees who are under age 50 cannot for a single year, both pre-tax and after-tax, If you work for a small company (100 contribute more than $17,500 to a 401(k) cannot be more than $52,000, or 100% of employees or less), your employer might plan on a pre-tax basis in 2014. Employees your yearly wages (whichever is lower) in offer you a SIMPLE plan as part of a 401(k) who are at least 50 years old at any time 2014. plan. This plan still allows you to contribute during the year can contribute an extra Suppose you receive $30,000 in wages a percentage of your pay toward your $5,500 on a pre-tax basis as a “catch- in 2014 and you will not reach age 50 retirement, but only up to $12,000 in 2014. during the year. You can defer $17,500 up” contribution. If you want to, though, You can contribute an additional $2,500 of those wages to your 401(k) plan on you can add to this total with after-tax a pre-tax basis. Another $12,500 could on a pre-tax basis if you will reach age 50 contributions. Your employer might even be contributed to your plan through during the year. choose to contribute to the plan in your after-tax contributions you make and/or contributions from your employer. name. Whatever the case, the grand total

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4240 whAt hAPPens to your contributions section 403(b) PlAns section 457(b) PlAns Your contributions to a 401(k) plan are put 403(b) plans are tax- 457(b) plans are tax-deferred retirement plans into a special account set up for you by deferred retirement plans for employees of state and local governments. your employer. Your money is then invested for employees of tax- Employees of tax-exempt organizations other in your employer’s stock, a mutual fund, exempt organizations. than churches can also use this plan. a bond fund, some kind of fixed income If you work for a public contribution limits investment, or some combination of these. school, college or Your employer might also choose to university, religious group, In 2014, you can contribute up to $17,500 on a “match” your contributions. Your employer or public charity, your employer may offer you pre-tax basis to your plan. Employees who are does this by putting into your account a this type of plan. You can contribute either to least 50 years old at any time during the year can certain fraction of a dollar for every full a “tax-sheltered annuity” or to a “tax-sheltered contribute an extra $5,500 on a pre-tax basis as dollar you contribute. As a result of these custodial account.” a catch-up contribution. Your employer can also investments and employer contributions, contribute to the plan on your behalf. The grand contribution limits you can expect your retirement money to total of contributions by you and your employer grow over time. In 2014, you can contribute up to $17,500 to for a single year, both pre-tax and after-tax, can’t your 403(b) plan on a pre-tax basis. Employees be more than $52,000 or 100% of your yearly who are least 50 years old at any time during the wages in 2014 (whichever is less). Your employer has the year can contribute an extra $5,500 on a pre-tax During the last three years before retirement, you DID YOU right to set a limit on the basis as a “catch-up” contribution. The grand might be able to contribute as much as double KNOW? percentage of your pay you total of contributions by you and your employer your elective deferral limit on a pre-tax basis. Your can contribute. This limit can for a single year, both pre-tax employer may allow you to contribute more be lower than the maximum and after-tax, can’t be more than the usual limit during these three years, set by law. than $52,000 or 100% of if you contributed less than your legal limit your yearly wages in 2014 in previous years. Ask your employer for (whichever is less). details about your specific plan.

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4043 Cafeteria plans come with a “menu” of possible benefits. The cAFeteriA PlAns cAFeteriA PlAns menu has to include at least one tax-free benefit and one cash Many employers offer their employees certain types benefit. The following are examples of common menu offerings. of benefits such as medical and dental insurance. If benefits are available to you, check to see if your employer is using what is called a “cafeteria” plan. If so, you’re in luck. Cafeteria plans allow employees to pick from a selection of benefit packages, the idea being to ensure that employees are paying only vAlue oF $50,000 Today’s SpecialsAnce uP to A for the benefits they really need. Once you choose P-term liFe insur Age grou a particular benefit package, you’ll pay for these dentAl cover medicAl And/or If you want more than $50,000 worth of life benefits with pre-tax and after-tax deductions from insurance, you’ll have to pay Social Security your paycheck. (Note: Some employers pay 100% You can extend this coverage and Medicare taxes on the additional to your spouse and children, amount you pay in premiums with a pre-tax of employee benefit plans and you won’t have to pay if you choose, and if your deduction. anything to get your benefits.) employer offers such coverage. cAre coverAge the AdvAntAge oF PAying For beneFits with Pre-tAx dePendent Ance deductions disAbility insur This benefit is limited to long-term $5,000. This coverage allows you to provide child care so Paying for your benefits with pre-tax deductions is a In case you become disabled you can work and home- and can no longer work. good idea. Why? If you do, no federal income, Social nursing care and the like to Security, or Medicare taxes are taken out of the an ill or disabled dependent. money you’re using to buy your benefits. The result: sAvings Account you’ll pay lower taxes and go home with more money A heAlth in your pocket on payday. If you ever convert any You can contribute to a An health savings account benefits into cash, though, by “selling” vacation days A 401(k) Pl through cafeteria plan pre- or the like, the cash you receive is taxable. Remember, contributions to this kind tax deductions. of retirement plan are subject to Social Security and Medicare taxes. AmericaAn PaAyroll AssociaAtion Chapter 4 • PRE- TAX DEDUCTIONS 4440 Once you’ve selected your benefits, they can’t nonexempt, or salaried to hourly status be changed during the plan year unless one of 4. Child status: reaching a certain age wArning! the following events occurs and the plan allows 5. Residency status (for you, your spouse the change: or child): moves to a different area 1. Health care premiums go up or down use it or lose it! significantly Flexible sPending Accounts Generally, you need to spend all the 2. Your health care coverage is significantly money you’ve put into your flexible lessened or ended altogether Many employers offer flexible spending accounts spending account by the end of the plan 3. The plan adds a new benefit option or as part of their cafeteria plans. If you choose to, year. If you don’t, any balance remaining significantly improves an existing one you can have pre-tax deductions taken out of in your account will be lost! But there are 2 exceptions. Your plan can add a “grace 4. Your spouse or child changes their benefit your paychecks and put into your own flexible spending account. You can put up to $2,500 period” for medical expenses paid up election under their employer’s cafeteria plan to 2 1/2 months after the end of the year a year into your health care flexible spending 5. Your status or your spouse or child’s status changes OR allow you to carry over $500 in your account. You can then use this money to pay for account from one year to the next. Be sure chAnges thAt cAn AFFect your beneFits certain medical, dental, or vision care expenses to figure out how much money you think that aren’t covered by your insurance. You can 1. Marital status: marriage, divorce, death of you’ll need in the account before deciding also set up a second flexible spending account to spouse, legal separation, or annulment on the size of your deductions. pay for child and dependent care expenses. 2. number of children: birth, adoption, You can withdraw more money from the placement for adoption, or death of a child QuAliFied medicAl exPenses medical flexible spending account than you’ve 3. Employment status (for you, your spouse, put into it, but only up to the total amount of Beginning in 2011, “qualified medical or child): getting or losing a job, being on your yearly deductions. To pay for dependent expenses” under a flexible spending account, medical savings account, or health strike or locked out, going on or coming back care expenses, you can take out only as much savings account do not include over-the- from a leave of absence, change in worksite, money as you’ve already deposited into the change from full-time to part-time, exempt to counter drugs unless it’s insulin or they account during the plan year. have been prescribed by a licensed doctor.

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4045 medicAl sAvings Accounts from your gross income on your income In these circumstances, the amount tax return. If your employer makes the withdrawn won’t be taxed. If you work for a small employer (50 contributions on your behalf, these aren’t contribution limits employees or less), they may offer a medical thought of as part of your wages. You don’t savings account. These are set up to help pay federal income or employment taxes Each year, you or your employer can people covered by high-deductible health on this amount either. contribute to your medical savings account insurance plans. (A “deductible” is the amount When you withdraw money from your as much as 65% of the health plan deductible of your medical bills that you’re expected account to pay for medical expenses, this for individual coverage, or as much as 75% to pay each year. Once you reach this money is tax-free. However, if you use your of the deductible for family coverage. If your deductible, your health insurance company medical savings account funds to pay for employer makes contributions for you, these will take over and pay the rest of your bills.) nonmedical expenses, the amount withdrawn will show up on your pay stub along with In 2014, you can set up a medical savings is subject to income tax, as well as an extra your other pre-tax deductions. Employer account if you’ve got individual coverage with 20% tax. This holds true unless you pull this contributions will also appear on your annual a yearly deductible of $2,200 to $3,250, or money out of Form W-2, Wage and Tax Statement. if you’ve got family coverage with a yearly your medical deductible of $4,350 to $6,550. You fund your savings medical savings account through deductions heAlth sAvings Accounts account from your wages, or your employer may make after you’ve Health savings accounts are designed to these contributions for you. You can use the reached age help employees save for medical expenses money in your account to pay for certain kinds 65 or have while they are employed and beyond, into of medical expenses. become retirement. In general, health savings accounts tAx beneFits disabled. are tax-exempt trusts or custodial accounts Medical savings accounts make it possible created to pay for the qualified medical for you to reduce your total tax bill, because expenses of the account holder and his or her you’re allowed to deduct your contributions spouse and dependents.

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4046 you must be in A high-deductible heAlth PlAn compensation, auto insurance, and other of 2014, you can make an additional catch-up Health savings accounts may be established limited coverage plans. contribution of $1,000 to a health savings account unless you are eligible for Medicare. by individuals who are covered by a high tAx beneFits deductible health plan, which is defined in Distributions from a health savings account for Employer contributions to a health savings account 2014 as a plan with an annual deductible of at qualified medical expenses are excluded from (including salary reduction contributions made least $1,250 for individual coverage or $2,500 your income if they are not covered by insurance through a cafeteria plan) are not subject to income for family coverage, and that has an out-of- or otherwise. Distributions from a health savings and employment taxes if the employer reasonably pocket expense limit of no more than $6,350 account that are not for qualified medical believes at the time the contribution is made that it for individual coverage and $12,700 for family expenses are included in gross income and are will be excludable from the employee’s income. coverage. subject to an additional 20% tax unless made For 2014, the maximum annual contribution Generally, you can’t open a health savings after death, disability, or the individual becomes that can be made to a health savings account account if you are covered under a high eligible for Medicare. Employer contributions, is $3,300 for individuals and $6,550 for family deductible health plan and another health plan, including salary reduction contributions through coverage. If you will be 55 or older by the end although there are exceptions for workers’ a cafeteria plan, will be reported on your W-2.

trAnsPortAtion Fringe beneFits

Your employer can help you save you 1. Your employer can have you and your 4. Your employer can reimburse you for up to $20 money on the cost of getting to work without coworkers driven to work and back home again per month for expenses related to commuting increasing your taxable income. Your employer in a company van. The maximum value of this to work by bicycle, but can’t set up a pre-tax can pay for transportation benefits outright, service is $130 per month in 2014. deduction for this benefit or combine it with any or set up a pre-tax deduction so you can buy 2. Your employer can supply you with transit other transportation fringe benefits. these benefits with tax-free earnings. The passes, tokens, or fare cards, up to a maximum following benefits can be provided using either value of $130 per month in 2014. of these arrangements: 3. Your employer can provide parking on or near the worksite, or at a “park and ride” location, up American Payroll Association to $250 perCh monthapter 4in • 2014.PRE-TAX DEDUCTIONS 4740 Now that you’ve learned most of what there is to know about cAlculAting Your Pre-tAx deductions pre-tax deductions, how do you do the actual math?

PArt i: gAry’s tAxAble weekly wAges 1 Gary calculates his 401(k) contribution by multiplying his weekly pay times his contribution $650 x .06 = $39 Gary is paid $650 each week in 2014. percentage of 6% » He contributes 6% before taxes to a 401(k) plan and $10 per paycheck in 2 Gary calculates the amount of his pay subject pre-tax deductions to a cafeteria plan. to federal income tax by subtracting both $650 – ($39 + $10) = $601 To figure out his taxable weekly wages, his 401(k) contribution and his cafeteria plan he goes through the following steps. deduction from his weekly pay »

Wait! To calculate the amount of his 3 pay subject to employment taxes, Gary remembers that 401(k) plans are not exempt $601 + $39 = $640 401(k) TAXES from Social Security and Medicare taxes, so he Social re-adds his $39 contribution (from step 1) » Security 4 By taking advantage of pre-tax deductions, Gary $650 – ($39 + $10) = $601 lowers the amount of his gross wages subject to federal income tax by $49, and the amount $640 subject to employment taxes by $10 »

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4048 PArt ii: gAry’s tAke-home PAy Gary knows the amount of his pay subject 1 to federal income tax from Part I: Step 2 above ($601). Using the “MARRIED Persons- Suppose that Gary is married, WEEKLY Payroll Periods” wage-bracket $29 claims two withholding allowances withholding table on page 47 of the Employer’s on his W-4, and has no state Tax Guide, Gary determines his federal income income tax. As you know, the tax withholding which is $29 » Social Security tax rate is 6.2% and the Medicare tax rate is Gary’s Social Security tax is based on Part I: $640 x .062 = $39.68 1.45%. Gary calculates his take- 2 Step 3 above ($640) and multiplied by 6.2% » home pay for the week using the following steps. 3 Gary’s Medicare tax is based on Part I: Step 3 above as well ($640) and multiplied by $640 x .0145 = $9.28 1.45% »

Gary adds up all the taxes he must pay from $29 + $39.68 + $9.28 = $77.96 4 Steps 1–3 above »

Wait! Gary remembers he had $601 left 5 from his $650 pay, after making his pre-tax deductions. So, he uses that number and $601 - $77.96 = $523.04 subtracts the total taxes from Step 4 above to get his take-home pay »

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4049 1 Without any pre-tax deductions, Gary’s entire weekly pay of $650 would be taxable. Using $34 PArt iii: gAry’s sAvings page 47 of the Employer’s Tax Guide, his federal income tax is $34 » What if Gary had used after-tax deductions, rather than pre-tax 2 Gary’s Social Security tax is also based on $650 x .062 = $40.30 deductions? Would it have made a $650 and multiplied by 6.2% » difference in his take-home pay? Gary’s Medicare tax is also based on $650 Absolutely. Watch what happens $650 x .0145 = $9.43 3 and multiplied by 1.45% » when Gary figures in his 401(k) contribution and cafeteria plan Gary’s after-tax deduction for his 401(k) plan $39 payment as after-tax deductions. 4 is $39 »

Gary’s after-tax deduction for his cafeteria $10 5 plan is $10 » 6 Gary adds up all his taxes and deductions $34 + $40.30 + $9.43 + $39 + from Steps 1–4 above » $10 = $132.73 7 To calculate his take-home pay, Gary takes his total wages and subtracts his taxes and $650 - $132.73 = $517.27 deductions »

Gary saves $5.77 per pay period by using pre-tax deductions » $523.04 - $517.77 = $5.77

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 5040 Go online

Access forms and more information on what you learned in Chapter 4:

• How major life events may influence retirement planning

• Definitions: Commonly used retirement plan definitions • Additional Resources: Forms, publications, and other government websites • Retirement Plans: IRS video portal

AmericaAn PaAyroll AssociaAtion CchapAPter 4 • PREre-TtAX DEeDUDuctionsCTIONS 4051 in this chAPter

Involuntary Deductions: Unpaid taxes, child support withholding orders, creditor garnishments, bankruptcy orders, student loans, and other federal debts.

chAPter 5 AFter-tAx deductions Voluntary Deductions: Wage assignments, union dues, credit union deductions, U.S. Savings Bonds, and contributions to charity.

Plus Form 668-W in-depth, know your rights, and calculating take-home pay. American Payroll Association Chapter 5 • AFTER-TAX DEDUCTIONS 52 chApter 5 AFter-tAx deductions

introduction Whether your after-tax deductions are voluntary unPAid tAxes introduction or involuntary, they come out of the earnings that If you don’t pay your federal taxes on time, and You already know that taxes and pre-tax are left after all of your taxes have been withheld. refuse to cooperate with the IRS’s efforts to deductions are deducted from your wages After-tax deductions do not affect the amount of collect those taxes, the IRS might issue a “tax before you receive your paycheck. There’s one taxes you owe. levy” against your wages. Your employer will be more kind of payment that’s withheld directly involuntAry deductions required to deduct whatever amount you owe from your earnings—after-tax deductions. the IRS from your wages, plus penalties and There are two types of after-tax deductions: (1) If you ever get hit with an involuntary deduction, interest charges. If this amount is small, the total “voluntary deductions,” which can be used to you should know that your employer has no choice will be taken from one paycheck. Deductions for pay union dues or to make contributions to a but to withhold the amount indicated in the court larger tax bills will be spread out over several pay charity, among other things, and (2) “involuntary or government order. Your employer is required periods. This deduction does not affect the taxes deductions,” which is money withheld as a result to send that amount to the person or agency you you pay on your wages. States and localities will of an order issued by a court or government owe. Any employer that disobeys this type of also issue tax levies if they are owed income tax. agency. You must pay it, whether you want to order will be subject to fines, and will have to pay When you’ve paid your entire tax bill, including or not. Involuntary deductions can be deducted whatever part of the required amount wasn’t taken penalties and interest, the IRS will send a written from your earnings to pay child support, unpaid out of the employee’s pay. Involuntary deductions notice to confirm this to your employer. At this taxes, or personal debts. are usually used to pay unpaid taxes, child support point, the involuntary deductions will stop. State tax orders, creditor garnishments, bankruptcy orders, levies work the same way as federal tax levies. and unpaid student loans.

AmericaAn PaAyroll AssociaAtion CchapAPter 5 • AFTERter-TtAX DEeDUDuctionsCTIONS 5253 Form 668-W(c)(DO) Department of the Treasury – Internal Revenue Service (Rev. July 2002) Notice of Levy on Wages, Salary, and Other Income TELEPHONE NUMBER DATE: OF IRS OFFICE: REPLY TO: Form 668-w in-depth instructions NAME AND ADDRESS OF TAXPAYER: Part 2 is your copy of the notice. Keep it for your records.

Form 668-W, Notice of Levy on Wages, TO: Salary and Other Income, is the form that the IRS sends to your employer to demand that some of your wages IDENTIFYING NUMBER(S): be withheld. It has six parts and it’s important that you understand what Kind of Tax Tax Period Ended Unpaid Balance of Assessment Statutory Additions Total you’re expected to do with the parts you are required to complete.

You must complete Parts 3, 4, and 5, which are identical. Return Parts 3 and 4 to your employer as soon as possible. If you don’t turn these back in in time, the IRS will tell your employer how Employer or Other Addressee: Please complete the back of this page. Total Amount Due Filing stAtus much to deduct from your pay. We figured the interest and late payment penalty to Statement of Exemptions and Filing Status (To be completed by taxpayer; instructions are on the back of Part 5) These ask you for information about your Retain Part 5 for your records, it is your My filing status for my income tax return is (check one): Single; Married Filing a Joint Return; income tax filing status (single, married Married Filing a Separate Return; Head of Household; or Qualifying Widow(er) with dependent child filing jointly, etc.) and about any dependents ADDITIONAL STANDARD DEDUCTION: (Enter amount only if you or your spouse is at least 65 and/or blind.) copy of the information you supplied I certify that I can claim the people named below as personal exemptions on my income tax return and that none are claimed on another Notice of Levy. you claim as personal exemptions. This No one I have listed is my minor child to whom (as required by court or administrative order) I make support payments that are already exempt from levy. to your employer and includes your tax I understand the information I have provided may be verified by the Internal Revenue Service. Under penalties of perjury, I declare that this statement of information will go to your employer and exemptions and filing status is true. filing status and personal exemptions. to the IRS. Your employer needs this to Name (Last, First, Middle Initial) Relationship (Husband, Wife, Son, Daughter, etc.) Social Security Number (SSN) determine how much of your take-home pay is exempt from the tax levy (see next page).

you Fill out Taxpayer's Signature Date

Sign and date. Part 3 — Return to IRS Form 668-W(c)(DO) (Rev. 7-2002) AmericAmericaAnn PPaAyrollyroll AssociAssociaAtiontion Chapter 5 • AFTER -TAX DEDUCTIONS 5254 the PArt oF your PAy thAt is subJect to tAx levy for instance, that you’re having a certain paid to you. The rest of your take-home pay There is a limit to the amount of your wages percentage of your salary put into a retirement goes to the IRS to pay off your tax bill. plan each payday. Then your supervisor gives the IRS can have withheld. Some of your take- the tAx levy And other involuntAry deductions home pay is exempt from deduction based you a raise. Since your salary goes up, the Bankruptcy orders always have to be paid on your estimated living expenses. Your take- deduction for your retirement plan will also go before tax levies. Child support withholding home pay is equal to your gross pay minus any up. Your deductions can also increase as a orders, if they were already in effect when the amounts withheld by your employer, like taxes result of a hike in the cost of your benefits. levy was issued, also have to be paid before and health insurance. These are the taxes and • Any additional, required deductions that you pay the IRS. Otherwise, your employer deductions that your employer can take out of are introduced by your employer after has to satisfy your tax levy before all your your gross pay: the IRS issues the levy. For example, if other involuntary deductions. If you’ve got • Federal, state, and local income taxes, as you work in a union shop your employer can more than one tax levy against your wages, well as employment taxes (Social Security require you to pay union dues. and your earnings can’t pay for all of them, and Medicare). Your employer your employer generally has to satisfy the one determines the • Any other involuntary or voluntary received first before turning to the others. deductions already being withheld from amount of your your wages when the IRS issued the tax levy income that is against you. The amount of these deductions exempt from the child suPPort withholding orders can be increased when necessary. Suppose, tax levy based on Wages withheld from your paychecks to satisfy your tax filing status and a child support order are another kind of the number of personal Your take-home pay is equal involuntary deduction. If you’re obligated exemptions you claim to your gross pay minus any by a court or agency order to pay child DID YOU on the 668-W This amounts withheld by your support, your earnings are subject to KNOW? exempt amount is employer, like taxes and immediate and automatic withholding subtracted from your health insurance. by your employer. Sometimes both take-home pay and parents, or one parent and the court,

AmericaAn PaAyroll AssociaAtion Chapter 5 • AFTER -TAX DEDUCTIONS 5255 agree to a different method of payment. In that case, child support does not need to be paid with involuntary deductions. If a child support payment is Know your Rights ever late, wage withholding will automatically start. It does not require a court or agency hearing. State your Protected emPloyment bAnkruPtcy order child support agencies are not required to notify you before sending a withholding order to your employer. Your employer can’t fire you, punish you, Your employer cannot continue They’re only required to tell you about it afterward. In or discriminate against you because to withhold wages for other addition, your employer has to obey a child support your pay is subject to child support garnishments (except for child withholding order received from another state. withholding. If an employer does, they will support) unless the trustee instructs when withholding begins, And when it ends be hit with stiff fines and can, if you were your employer to do so. If you have fired, be ordered to give your job back. a creditor who isn’t listed in the Your employer will start withholding child support bankruptcy order, your employer within 14 working days of receiving the order. gArnishments needs to ask the trustee whether In some states, withholding has to begin even You cannot be fired because your or not to continue with that specific sooner. Your employer sends the money to the earnings are subject to garnishment garnishment. You cannot be fired for state disbursement unit named in the order. The for a single debt, no matter how many having a bankruptcy order issued deductions will continue until your employer garnishments are issued to collect it. A against you. receives written notice from the court or agency single debt usually means one debt owed that issued the order to stop the withholding. When to one creditor, but a single debt also your child or children become “emancipated”— results when several creditors combine that is, when they reach the age of 18 or 21, their debts into a single “garnishment depending on the state—you no longer have action.” It’s also considered a single debt to pay child support. In this case, it’s your when one creditor combines a number of responsibility to have an order issued to stop the debts into one garnishment. withholding.

AmericaAn PaAyroll AssociaAtion CchapAPter 5 • AFTERter-TtAX DEeDUDuctionsCTIONS 5256 % oF disPosAble eArnings that can be withheld for child suPPort

do you mAke your child suPPort PAyments on time?*

*Your employer withholds your Are you already supporting I make my payments I am more than 12 weeks current support obligations before another spouse and/or child? yes. on time no late with payments turning to past-due amounts. If you’re , paying past-due child support, your current payments plus these other amounts cannot exceed the maximum 50% withheld 55% withheld percentage. State law can lower yes the maximum percentage that may be withheld, but cannot raise the 60% withheld 65% withheld percentage past the federal limits no shown here.

the PArt oF your PAy thAt is subJect to child suPPort And other involuntAry deductions was not correctly withheld. Also, depending child suPPort withholding Tax levies receive priority. Tax levies that your on state law, your employer may be allowed The order received by your employer states employer received before the child support to deduct a small fee each pay period for the amount to be deducted from your withholding order was established by the processing wage-withholding orders. wages. This amount is subtracted from your agency or court have to be paid before the “disposable earnings,” which are what’s left child support, unless the IRS says otherwise. State child support agencies from your gross pay after your employer Other than this exception, your employer has to are not required to notify you deducts any amounts for income and satisfy your child support withholding before all DID YOU before sending a withholding employment taxes. Federal law sets limits on your other involuntary deductions. KNOW? order to your employer. They’re the percentage of your disposable earnings Your employer must deduct the full total only required to tell you about it that can be withheld to pay for child (or required by the support order. If they do not, afterward. spousal) support (see table above). they are responsible to pay the amount that

AmericaAn PaAyroll AssociaAtion CchapAPter 5 • AFTERter-TtAX DEeDUDuctionsCTIONS 5257 creditor gArnishments Say you have $400 in weekly disposable earnings. wArning! If you owe a debt to someone, that person (your To figure out your maximum garnishment: creditor) might go to court to have some of your (1) Multiply your weekly disposable earnings by wages withheld from your paycheck and sent to 25%: $400 x .25 = $100. him or her. This is called a “creditor garnishment.” (2) Subtract $217.50 from your weekly disposable iF you’re PAid by the hour, These require your employer to withhold the earnings: $400 - $217.50 = $182.50. be cAreFul amount you owe from your take-home pay, up to a (3) Compare the two results. Creditor garnishments may certain legal maximum (see below). $100 is the maximum amount that can be withheld reduce your earnings below from your paycheck weekly. when withholding begins, And when it ends minimum wage. This is These amounts can be adjusted if you’re Your employer will receive a court notice explaining possible because the amount not paid on a weekly basis. State law the reason for the garnishment and the total withheld is considered to be can’t allow a higher limit on creditor amount of your debt. Your employer should part of your wages. If your garnishments but can set a lower limit. give you a copy of this notice, and then begin employer deducts more than In some states, this type of involuntary withholding wages. This deduction ends when the federal limit, though, the deduction is illegal. you’ve paid off your entire debt. extra amount withheld isn’t creditor gArnishments And other involuntAry deductions thought of as part of the PArt oF your PAy thAt is subJect to creditor gArnishments your earnings. This Your employer has The maximum amount of your take-home pay that extra deduction may to deduct for a child can be garnished in a week is the smaller of the not reduce your support withholding order, following two possibilities: pay level below the a tax levy, or a bankruptcy minimum wage. 1. 25% of your weekly disposable earnings. order before turning to a creditor 2. Your weekly disposable earnings minus garnishment. If any one of these $217.50 (30 times the current federal other deductions, or a combination minimum wage of $7.25). of them, amounts to 25% or more of

AmericaAn PaAyroll AssociaAtion Chapter 5 • AFTER -TAX DEDUCTIONS 5258 your disposable earnings, your employer can’t in which garnishments must be paid varies in earnings be paid to the trustee. The bankruptcy withhold anything for the garnishment. different states. trustee will pay your creditors with these withheld wages. multiPle gArnishments bAnkruPtcy orders bAnkruPtcy orders And other involuntAry deductions Regardless of how many garnishments If you’ve been legally declared bankrupt, are issued against you, the limit outlined a “bankruptcy trustee” is appointed by the Bankruptcy orders have to be satisfied before above still applies. Once your employer is bankruptcy court and will arrange for the all other claims against your wages, other withholding the maximum amount from your payment of your creditors. This trustee might than child support withholding orders and wages, nothing further can be deducted, even send a bankruptcy order to your employer, repayments of loans from your retirement plan. if another garnishment is received. The order requiring that a certain amount of your When your employer receives a bankruptcy

student loAns If you’ve failed to repay a loan granted under the Know your Rights federal Guaranteed Student Loan Program, your wages may be garnished to pay off this debt.

The following restrictions about the garnishment at are fired because of this later, except for child and • Any employer that does apply to student loan least 30 days before your garnishment, you can take spousal support with- not obey a student loan garnishments: employer starts withhold- your employer to court. holding orders. garnishment order will ing your wages. You can The court may order your have to pay whatever • no more than 15% of your use that time to work out employer to rehire you, • Suppose you lose your amount wasn’t correctly disposable earnings can a repayment schedule for and to pay the back wag- job, but manage to find withheld from the em- be withheld to satisfy an the loan to avoid having es you lost while you were another one within a ployee’s wages. Such an unpaid student loan, un- your earnings garnished. out of work. year. Your wages can’t employer will also be hit less you agree in writing be garnished to pay with fines and court fees. to a higher percentage. • Your employer cannot fire • Your student loan gar- off a student loan until or discriminate against nishments are more you’ve been employed • The loan guarantee you because of a student important than other at that second job for at agency has to tell you loan garnishment. If you garnishments received least 12 months. AmericaAn PaAyroll AssociaAtion ChapchterAPter 5 • 2 AF • TERPA ychec-TAX DKE bDUAsicsCTIONS 59522 order, your other involuntary deductions voluntAry deductions wAge Assignment limits that don’t have priority will cease. Your Since wage assignments are voluntary, there Not every after-tax deduction is involuntary. trustee will arrange for you to pay off all your are no federal limits set on them. If the wages You can choose to have wages subtracted debts, including those represented by these you assign aren’t enough to pay off a certain from your take-home pay each pay period involuntary deductions. debt, though, and a creditor garnishment is to repay a debt, pay union dues, make issued, the garnishment limits will apply to other FederAl debts contributions to a charity, etc. Remember, your withholding. Your wages can be garnished to pay off though, that these after-tax deductions won’t Wage assignments can legally lower your loans or benefit overpayments made by lower your taxes or limit your involuntary earnings below minimum wage. The money other agencies of the federal government, deductions. Your employer will see to it that all paid to your assignee is thought of as money such as the Small Business Administration, your other deductions are made before turning paid to you. Social Security Administration, Veterans to any voluntary withholding from your wages. Administration, and Housing and Urban wAge Assignments wAge Assignments And stAte lAw Development. If you’re in debt, you can voluntarily agree to Even though federal law doesn’t limit wage have part of your wages sent each payday to assignments, your state law might. You someone called an “assignee.” This person will should check with your employer, your see to it that your creditor is paid off, if for some state’s labor department, or a lawyer reason you don’t succeed in repaying your debt before agreeing to a wage assignment. on time. This is called a “wage assignment.” The following issues may affect wage assignments in your state: You may also use a wage assignment to pay child support or pay back-taxes to the IRS. • Your employer can refuse to accept wage By signing up for voluntary withholding in assignments, unless legally required to these cases, you avoid having involuntary do so. deductions taken from your earnings. • Your state might not allow wage assignments at all.

AmericaAn PaAyroll AssociaAtion CchapAPter 5 • AFTERter-TtAX DEeDUDuctionsCTIONS 5260 union dues type of deduction is allowed. If it is, you have If you belong to a union, you can have your to give your employer permission to begin union dues deducted from your after-tax withholding wages. This permission needs to wages and paid by your employer. Only dues, take the form of a written statement, signed initiation fees, and assessments can be paid by you, which details (1) the amount you want to your union in this way. You have to give withheld each pay period, (2) how long you your employer written permission for this want the deductions to go on, and (3) where deduction. Once you’ve provided permission, exactly you want the withheld money to go. you can’t change it until the union contract expires or until a full year goes by. At that u.s. sAvings bonds • Most states will only allow point, you need to tell your employer to stop you to assign wages that the deduction, or sign another permission Employees can buy Series EE and Series I you’ve already earned. In form to continue. U.S. Savings Bonds worth $25 or more other words, they won’t through after-tax wage deductions that are credit union deductions permit you to assign future wages. similar to direct deposit. To buy a bond, you • If your state does allow you to assign future Credit unions are savings and loan companies pay its face value. For example, if you want wages, it will probably limit the amount that have been set up by individuals with a $50 savings bond, you’re required to pay you can assign, and the time span your similar interests. Many employees who have $50 for it. assignment can cover. access to credit unions turn to them, instead In order to buy bonds through payroll, you of banks, when saving or borrowing money. • States attach different degrees of need to use TreasuryDirect, a financial If you use a credit union, your employer importance to wage assignments. Your services website that allows individuals to might allow you the convenience to deduct employer might be required to pay off all buy Treasury securities directly from the wages and put the money directly into your other deductions before turning to your U.S. Treasury, including savings bonds, in savings account, or apply the money to your wage assignment. electronic form. credit union loan. Ask your employer if this

AmericaAn PaAyroll AssociaAtion CchapAPter 5 • AFTERter-TtAX DEeDUDuctionsCTIONS 5261 the AdvAntAges oF sAvings bonds ProoF oF contribution reQuired Savings bonds start accumulating interest If you want to deduct financial charitable in the month they’re purchased. All the contributions on your federal income tax Go online interest you earn on the bonds is free from return, you have to have documentation federal income tax until you cash in the showing the name of the charity and the date bonds. If you’re using the bonds to pay and amount of the contributions. Access forms and more information on what you learned in Chapter 5: for your children’s college education, the If you want to claim a charitable deduction interest may be totally tax-free. In any made through one or more payroll deductions • The IRS collecting process: Notice case, none of the interest will be subject on your federal income tax return, you will of Levy—Levy on Wages, Salary, and to state or local taxes, and the part of your need both: Other Income paycheck you used to pay for the bonds 1. Your pay stub, W-2, or any other document • Tables for Figuring Amount has already had all federal, state, and local provided by your employer that shows how Exempt from Levy on Wages, taxes taken out of it. much of your paycheck was withheld to Salary, and Other Income contributions to chArity contribute to the charity. • Find your state’s labor department 2. A “pledge card” or other document provided Your employer might offer you the chance to • TreasuryDirect, a financial services by the charity that shows the name of the make voluntary donations to a charity using website that allows individuals to deductions from your wages. Your employer charity. buy Treasury securities directly from withholds the amount you specify, and gives If you have $250 or more deducted from any the U.S. Treasury, including savings that money to the charity or charities of your one paycheck as a charitable contribution, the bonds, in electronic form. choice. If you itemize deductions on your charity must include a statement to the effect • Emancipation of minors, by state. federal tax return, you can deduct the amount that no goods or services were given to you in of certain charitable contributions you’ve made return for your donation. during the year.

AmericaAn PaAyroll AssociaAtion CchapAPter 5 • AFTERter-TtAX DEeDUDuctionsCTIONS 5262 in this chAPter

First the Basics: Form W-2, your Wage and Tax Statement. Also: The Earned Income Credit Check on Your Social Security chAPter 6 your rights And resPonsibilities Earnings and Benefits in the workPlAce Workers’ Compensation Insurance ‘COBRA’: Your Right to Continued Health Coverage Educational Assistance Adoption Assistance Unemployment Insurance

Plus Go online to access forms and more information on what you learned in Chapter 6. American Payroll Association Chapter 6 • YOUR RIGHTS AND RESPONSIBILITIES IN THE WORKPLACE 63 chApter 6 your rights And resPonsibilities in the workPlAce

Form W-2 lists all wages paid by your employer for the employer for one day. FFirstirst thethe bbAAsicssics:: and the total amount of tax deductions made If any of the following conditions applied to FFormorm ww-2,-2, youryour wwAAgege during the calendar year. It is used to complete you during the previous calendar year, your your federal income tax return and any state or employer has to get your W-2 in the mail to AAndnd ttAAxx ststAAtementtement local income tax returns that are required. Your you by January 31 of the current year: employer reports the information on your W-2 When you become an employee, you gain • You received payment from your to the Social Security Administration so your the legal right to various benefits and employer for work you performed. This Social Security account can be credited. The opportunities. These can help you save money payment could have taken the form of wages, on your federal income tax return, take time off Social Security Administration then passes the tips, or some other kind of compensation. without being fired when a family member gets information on to the IRS. • You had federal income, Social Security, sick, and adopt a child, among other things. If you use a professional tax return preparer, and Medicare taxes withheld from your pay. Your employer may help out, but it’s generally accountant, or return preparation company to your responsibility to act. This final section file your taxes, make sure you give them all your • You would have had income taxes withheld explains the programs available, and W-2 forms at the start. Do not substitute your from your pay, but the number of withholding what to do to make them work final pay stub of the year for your W-2 because allowances you claimed on your W-4 was so for you and your family. some of the information on the pay stub may high that no taxes were deducted. have changed before you received your W-2. • You would have had to pay income taxes, Each employer you worked for during the year but you realized you were exempt from must give you a W-2, even if you only worked withholding.

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6364 Form w-2 in-depth a Employee’s social security number Safe, accurate, Visit the IRS website at 123-45-6789 OMB No. 1545-0008 FAST! Use www.irs.gov/efile b Employer identification number (EIN) 1 Wages, tips, other compensation 2 Federal income tax withheld This form is actually made up of six 45-6789012 63000.00 5525.00 separate copies. Your employer keeps c Employer’s name, address, and ZIP code 3 Social security wages 4 Social security tax withheld 65000.00 4030.00 one and sends the others as follows: Mike's Sporting Goods 5 Medicare wages and tips 6 Medicare tax withheld one to the state tax agency, one to the 123 Elm Street 65000.00 942.50 Social Security Administration, and 7 Social security tips 8 Allocated tips Hometown, VA 98765 three to you. They should be provided d Control number 9 10 Dependent care benefits to you or postmarked no later than e Employee’s first name and initial Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 January 31. C o d Thomas R Johnson e D 2000.00 13 Statutory Retirement Third-party employee plan sick pay 12b C o ✔ d 4567 Elm Street e 14 Other 12c C o d Hometown, VA 98765 e coPy b 12d C o d e File with your federal tax return f Employee’s address and ZIP code 15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name VA 44-55667 63000.00 1890.00 coPy c Wage and Tax Department of the Treasury—Internal Revenue Service Keep for your personal records Form W-2 Statement 2014 Copy B—To Be Filed With Employee’s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. coPy 2

File with your state tax return

AmericAmericaAnn P PaAyrollyroll Associ AssociaAtiontion Chapter 6 • YOUR RIGHTS AND RESP ONSIBILITIES IN THE WORKPLACE 6365 your w-2 mAy come to you by emAil or Your W-2 includes only those wages paid to Administration. If this happened, you might over the internet you during a specific calendar year, no matter end up receiving lower Social Security Your employer may provide your W-2 when you earned those wages. benefits after retirement than you’re actually electronically rather than on paper, with Suppose you earn $400 between December owed. If you spot a mistake let your employer your approval. If you agree by responding 25 and December 31, 2013. You don’t know immediately so it can be corrected as actually receive those wages until January soon as possible. electronically to your employer’s notice, 4, 2014, so the amount you earned that your W-2 will be made available on the week won’t appear on your 2013 W-2. Some of the totals on your W-2 might Internet at a secure website or sent to you Those earnings will instead show up on not match those shown on your final pay as an email attachment by January 31. You your 2014 W-2. stub. This doesn’t mean that either the can then print out all the copies you need whAt to do iF you lose your w-2 W-2 or the pay stub is wrong. Instead or download the information to an income it could mean that some of your wages Your employer can replace the lost form with tax return preparation program to file your weren’t subject to withholding for income or a “reissued statement.” This will take a little tax returns with the IRS and state or local employment taxes. time to process, so be prepared to wait. Your government agencies. If you don’t agree, Suppose that you contributed to a 401(k) employer might charge you a fee for providing your employer must give you a paper W-2. retirement plan throughout the year. The you with a new W-2. amounts you paid into the plan were not subject to income tax withholding, so check your w-2 For mistAkes! they will not appear on your pay stub as part of your gross taxable wages. Make sure your name, address, and Social If you agree to get your W-2 They also won’t show up in your federal Security number are correct. You should also taxable income total (Box 1) on your W-2. electronically but then change DID YOU compare your final pay stub for the year with Your gross taxable wages (from your pay your mind, you can withdraw KNOW? the wage, tax, and other amounts shown stub) should match the number in Box 1 your agreement, but your of your W-2. on the W-2 to be certain your employer employer then has 30 days to got all the numbers right. Mistakes on your Even though income taxes weren’t taken out provide your paper W-2. W-2 could cause an incorrect amount of of your 401(k) contributions, employment earnings to be reported to the Social Security taxes (Social Security and Medicare) were

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6663 subtracted from these contributions. The the eArned income credit Also, see the full Who Can Claim the wages you paid into your retirement plan Earned Income Credit? table on the will appear as part of your total earnings in Once you have your W-2 you’re ready to file following page. Boxes 3 and 5 of your W-2, where your total your income tax return. If you earned less than does my emPloyer hAve to tell me About the eArned wages subject to employment taxes are a certain amount last year you’re entitled to the income credit? shown. (These amounts will also be included “earned income credit,” a tax credit you’ll receive in Box 12, and your employer has to check in the form of a tax refund. Your W-2 will tell you If there’s no federal income tax withheld the “Retirement plan” box in Box 13, except about the earned income credit if you qualify for from your wages, your employer is required for 457(b) plans.) In this case, the number it, but it’s your responsibility to claim the credit by law to tell you that you’re entitled to the that appears in Boxes 3 and 5 on your W-2 when you file your income tax return. Even if earned income credit. This holds true unless will not match your gross taxable wages on you don’t usually file a tax return because your you claimed to be exempt on your W-4. If your pay stub; the number on your W-2 will income is lower than the filing requirements, you earn less than $52,427 in 2014, your be higher. you must file a tax return to receive the credit. employer is encouraged to tell you about the For 2014, the maximum credits available are as earned income credit, though the law doesn’t iF you leAve your Job follows below: require this. If your employment ends before the calendar year, you can make a written If you have: Your maximum credit is: request to your employer for your W-2 at that time, but, if you’re not in a hurry, you 1 One qualifying (dependent) child $3,305 will receive the form the following January. If you request your W-2 in writing, your 2 Two qualifying children $5,460 employer has to mail out your W-2 within 30 days of your request, or within 30 days 3 Three or more qualifying children $6,143 of your final wage payment, whichever happens later. 0 No qualifying children $496

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6367 who cAn clAim the eArned income credit? You can claim the Earned Income Credit for 2014:

you’ve met one oF the Following iF your 2014 AdJusted gross income is less thAn... AND two conditions AND you’ve met All oF the Following conditions

$38,511 and your tax filing status is single or head of You had a qualifying child You filed your tax return as a single person, as household and you have 1 qualifying child 1 who lived with you in the married filing jointly, as head of household, or as U.S. for more than six a qualifying widow or widower with a dependent $43,941 and your tax filing status is married filing months during the year. child. jointly and you have 1 qualifying child It doesn’t matter if the child was away at school. $43,756 and your tax filing status is single or head of You didn’t take the exclusion for foreign earned household and you have 2 qualifying children income or housing expenses, or the deduction for You don’t have a qualify- foreign housing expenses. ing child but you (and your $49,186 and your tax filing status is married filing 2 spouse) are between 25 jointly and you have 2 qualifying children and 65 years old, you’ve You are not a nonresident alien (unless you are lived in the U.S. for at married to a U.S. citizen or resident and choose to $46,997 and your tax filing status is single or head of least half the year, and be treated as a resident alien for tax purposes). household and you have 3 or more qualifying children you can’t be claimed as a dependent on someone $52,427 and your tax filing status is married filing else’s tax return. You have no more than $3,350 of certain types jointly and you have 3 or more qualifying children of unearned income (e.g., interest and dividends, capital gains) for the year. $14,590 and your tax filing status is single or head of household and you have no qualifying children You include a valid Social Security number for $20,020 and your tax filing status is married filing yourself, your spouse, and your qualifying children on your personal tax return. jointly and you have no qualifying children

AmericAmericaAnn PPaAyrollyroll AssociAssociaAtiontion Chapter 6 • YOUR RIGHTS AND RES PONSIBILITIES IN THE WORKPLACE 6368 Your employer has to provide you with one of check on your sociAl security beneFits how to Prevent errors the following documents when notifying you You can help to make sure that all your about the earned income credit: The Social Security Administration can provide you with an estimate of your Social Security wages are properly reported to the Social 1. Copy B of Form W-2: this has the earned benefits from their website at socialsecurity. Security Administration if you’re careful to do income credit statement on the back. gov/estimator. each of the following: 2. Notice 797, Possible Federal Tax Refund 1. Report a name change by calling 800- Due to the Earned Income Credit. SSA-1213, asking for Form SS-5, the 3. A written statement with the exact same Application for a Social Security Card, wording as Notice 797. completing the form, and submitting it to Your employer also may be required by the Social Security Administration. state law to notify you about the earned 2. Check your name and Social Security income credit, whether you appear to be number on your employer’s payroll eligible or not. records whenever you’re asked to, and on your W-2 when you receive it each year. cAn i get AdvAnce PAyments oF the eArned The information should agree with your income credit? Social Security card. Before 2011, you were able to get advance 3. Reply quickly to the Social Security payments of part of your earned income Administration if you’re contacted credit with your paychecks, instead of waiting about name changes, since this to receive all your credit when you file a tax probably means your name or Social return. Beginning in 2011, however, you may Security number has been entered no longer get advance payments of your incorrectly on your W-2 or on some other earned income credit. You need to claim it all official form. on your income tax return.

AmericaAn PaAyroll AssociaAtion Chapter 6 • YOUR RIGHTS AND RESPONSIBILITIES IN THE WORKPLACE 6963 workers’ comPensAtion insurAnce over your workers’ compensation benefits to your employer. If you’re injured or get sick on the job, you might be entitled to workers’ compensation benefits. All employers the FAmily And medicAl leAve Act are required by law to carry workers’ If you work for a company with 50 or more compensation insurance. In the event employees within a 75-mile radius of your you suffer a work-related injury or worksite, the Family and Medical Leave Act illness, this insurance pays all your applies to you. This law gives you the right medical bills. This is true no matter who to take up to 12 weeks of unpaid leave per is responsible for the error that led to year to deal with: your injury or sickness. Over and above Some these medical bills, workers’ compensation larger employers, • Your own serious illness. insurance also pays you income benefits usually in the public sector, are self- • A serious illnesses of your child, spouse, or during the time you’re unable to work. insured and pay workers’ compensation parent. These cash benefits are usually some benefits themselves. If this is the case • The birth of a child. percentage of your regular wages. with your employer, your benefits will still • The placement with you of an adopted or be tax exempt. tAxes And your workers’ comPensAtion beneFits foster child. Your workers’ compensation benefits While you’re receiving workers’ • An emergency because your spouse, are not considered to be wages, nor are compensation benefits, your employer child, or parent is on active duty with the they included in your gross income. They might keep paying you all or part of military or has been notified of a call to are not subject to income taxes, Social your regular wages. These wages are such active duty. Security tax, or Medicare tax, as long as subject to withholding for all income While you’re on leave, you have the right they don’t go over the benefit limit set by and employment taxes. This kind of to continue your health coverage just as state law. arrangement might also require you to turn though you were working. This means

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6370 that if you had to which emPloyees Are entitled to tAke FAmily And company’s workforce, if their absence would pay all or part of medicAl leAve? significantly hurt the company. your insurance You can take advantage of the Family and when cAn i tAke FAmily And medicAl leAve? premiums while Medical Leave Act if all of the following If you request leave because of (1) the you were on the conditions apply to you: job, you have birth of a child, or (2) the placement of an 1. You work for a covered employer. to keep paying adopted or foster child, you have to take those during 2. You’ve been working for this same the leave within 12 months of the birth or your leave. employer for at least 12 months before placement. you request family or medical leave. When you If you need leave (1) to care for someone These 12 months do not have to have come back in your family with a serious health been in a row, but hours worked before a from leave, you condition, (2) because of your own serious break of seven years or more need not be should get your old job back, or health condition, or (3) to deal with an counted. at the very least a job with similar pay and emergency caused by a family member’s benefits. 3. You’ve worked for this employer at least 1,250 hours during the 12 months which emPloyers hAve to grAnt FAmily And before your leave request. (This amounts The Family and Medical medicAl leAve? to eight months of work at 40 hours per Leave Act allows you to Employers have to adhere to the Family week, or 12 months of work at 25 hours take up to 26 weeks of and Medical Leave Act if they have 50 or per week.) unpaid leave to care for more employees working either at a single Seasonal and part-time employees can take a spouse, child, or parent worksite or within 75 miles of each other. family and medical leave if they meet all of QUICK TIP who suffers a serious This minimum of 50 employees includes these requirements. Employers do not have injury or illness in the line part-timers and any workers who are on to offer family and medical leave to “key of duty while on active duty leave or suspension. salaried employees,” i.e., those workers with the military. who belong to the highest-paid 10% of a

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6371 call to active duty, you have to use the medical care facility, or some kind of leave within a 12-month period. Your continuing treatment by a health care DID YOU who’s covered employer sets this 12-month period; it can provider. This continuing treatment has KNOW? be a calendar year, a fiscal year, or a year to keep the patient out of work or school and for how long? beginning on the date you started work or for at least three days in a row, including the day your leave began. weekends and holidays. Continuing Remember, you can only take family and If you request leave to care for a family treatment also has to involve follow- medical leave to care for a child, spouse, member with a serious injury or illness up care by a health care provider—two or parent. Other family members and suffered in the line of duty while on active visits in the first 30 days, with the first in-laws are not covered by this act. military duty, the 12-month period visit within seven days of the first day If both you and your spouse work for the you have to take the leave of incapacity. Exceptions are made to same employer, the two of you are entitled begins on the first day you this three-day requirement in the case to a total leave of 12 weeks to take care take the leave. of treatment for chronic conditions, like asthma or diabetes, and in the case of of a newborn baby, a newly adopted child, whAt QuAliFies As A ‘serious heAlth treatment for pregnancy. or a seriously ill parent. So, for instance, condition’? you could each take six weeks, or one of cAn i tAke intermittent leAve under the FAmily And you could take eight weeks while the other A serious health condition can medicAl leAve Act? takes four, and so on. If you or your spouse qualify as an illness, injury, become ill, or your child comes down with impairment, or physical If it’s medically necessary, yes, you can a serious sickness, each or mental take your leave intermittently under the of you can condition. It Family and Medical Leave Act. Taking take the full has to involve intermittent leave involves spreading out 12 weeks of inpatient care your work absences over several days, leave. in a hospital, weeks, or months, missing a few hours here Back hospice, or and a few days there. It can also involve to work! residential working a reduced schedule, such as going

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6372 from full-time employment to part-time. about in advance, you need to give your You might want to take advantage of this employer 30 days notice. If that’s not Know kind of leave if you know you’re going to realistic, give as much advance notice be absent from work to receive a series as possible. The same rules apply to your Rights of ongoing medical treatments. The hours emergency situations: give whatever you are not at work can be deducted from notice you can. If you knew well in your wages, even if you’re an exempt advance the reason for your leave, but obeying the FAmily And medicAl leAve Act employee. This reduction in your salary you didn’t tell your employer about it until will not make you a nonexempt (hourly) the last minute, your employer has the If you think your employer is violating the employee. right to deny your leave request for up to Family and Medical Leave Act requirements, 30 days. contact the Department of Labor’s Wage and do i hAve to use uP my PAid leAve First? Hour Division. You can sue your employer Your employer can require you to use all to recover wages and benefits that were your paid, sick, vacation, and personal illegally denied to you. You can also sue days before starting your unpaid family your employer to get your old job back if it and medical leave. These days become is not available when you return from leave, part of your total 12-week leave. Your or if you’re given a new job that amounts employer has to notify you when your to a demotion. If you win your case, your absence from work is being counted employer has to pay all costs incurred in under the Family and Medical Leave Act. your lawsuit. when do i hAve to notiFy my emPloyer? If you request leave to care for a newborn baby or a newly adopted child, or for medical treatments you know

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6373 ‘cobrA’: your right to continued whAt counts As A QuAliFying event? If you want to retain your group health plan coverage, you heAlth coverAge Any one of the following events will trigger must inform your employer. COBRA coverage: how do i know iF cobrA APPlies to me? You have 60 days from the 1. You leave your job (for some reason other date your group coverage If you participate in your employer’s group than “gross misconduct”), or the number of QUICK TIP ends to make up your mind. health plan, and something happens to cause hours you work are cut back. you and your family to lose those health 2. You become divorced or legally benefits, you might be able to continue your separated. In this case, COBRA covers the how do i tAke AdvAntAge oF my cobrA coverAge? coverage under COBRA, the Consolidated spouse who would otherwise lose access to Omnibus Budget Reconciliation Act. COBRA If you’re a covered family member, you might the group health plan. is a federal law that allows you and your family not be notified that your coverage has ended to retain group health insurance for up 3. You become entitled to Medicare until several days after this has already to three years after experiencing a benefits. happened. In that case, you have 60 days “qualifying event.” 4. Your child no longer from the date you were notified to decide whether or not to continue coverage. You can keep your health plan qualifies as your dependent benefits going for yourself individually or adult child under age 26 do i hAve to PAy Premiums under cobrA? and for any of your family members under the group health plan. You will be charged premiums for your who were covered at the time the 5. You are retired and continued coverage. How much you pay is qualifying event occurred. Once you’ve bankruptcy proceedings determined by the regular group premiums qualified for continued benefits, your cause you or your charged to your employer by your health plan. employer can’t cut them off any earlier than dependents to lose You and any covered family members can the law allows. If your employer cancels coverage. be required to pay up to 102% of the group its entire group health plan, though, 6. You die. Surviving family premium for the coverage you select. After 18 your COBRA coverage will cease. members can take advantage months, this can go up to 150% of the regular of COBRA in this case.

AmericaAn PaAyroll AssociaAtion Chapter 6 • YOUR RIcGhHTSAP terAND 6 RES • yourPONSI rightsBILITIES An IND resTHEP WonsibilitiesORKPLACE in the worKPlAce 6374 premium, but only for disabled individuals. member coincidentally becomes disabled at courses not relAted to your Job You can pay these premiums in monthly the same time, the plan administrator needs Some employers offer educational assistance installments. Your first payment can’t legally to be told about that person’s disabled status for courses unrelated to employees’ jobs. If come due any earlier than 45 days after you within 60 days. (This status will affect the period your employer agrees to pay for such courses, decide to continue coverage. of coverage and the premiums paid by that you should know that up to $5,250 per year particular family member.) This individual also whAt Are my resPonsibilities under cobrA? of this assistance is totally tax-free. Employer has to let the administrator know within 30 days payments of more than $5,250 are subject Upon first joining a group health plan, your if he or she is declared to be no longer disabled. to federal income tax, Social Security tax, employer has to give you written notice of your Medicare tax, and even federal unemployment right to continue coverage under COBRA. You tax. These rules also apply to graduate-level have to notify your health plan administrator educAtionAl AssistAnce beneFits courses. within 60 days if your qualifying event is a If you’re interested in taking educational courses, courses relAted to your Job divorce, a legal separation, or a child’s loss of check to see if your employer offers educational covered status. If your COBRA coverage is assistance to employees. Your employer might If your employer pays for you to take courses triggered by your leaving your job or cutting pay for certain types of courses or programs you related to your work, the amount paid usually isn’t back on working hours, and a covered family choose to attend. included in your taxable income.

American Payroll Association Chapter 6 • YOUR RIGHTS AND RES PONSIBILITIES IN THE WORKPLACE 7563 unemPloyment insurAnce beneFits of time, and earned a certain minimum amount of wages, in AdoPtion assistance beneFits If you lose your job, you might be the recent past. entitled to unemployment insurance Some employers offer adoption assistance benefits. These are intended • You have to be involuntarily programs. If your employer is one of them, to provide some income while unemployed for reasons other and you want to adopt a child, inform you look for other work. We’ve than misconduct at work. your employer. Up to $13,190 per child provided many answers to your in employer assistance is free from • You have to file a claim for questions about unemployment federal income tax in 2014. (Be aware benefits and register for work insurance here, but if you need that these payments are still subject to with your state’s unemployment more details call or visit your local Social Security and Medicare taxes.) office. unemployment office. This money can be used for “reasonable • You have to be physically and and necessary” adoption expenses, which Am i eligible For unemPloyment mentally ready and able to work. include adoption fees, court costs, attorney’s fees, and traveling beneFits? • You have to be actively looking expenses (including money spent for food and lodging), as for work, and available to go To receive benefits, you have to long as these expenses are directly related to the adoption. to work if you’re asked to. This meet the following requirements: The individual you’re adopting has to be under 18 years old, or requirement applies unless you’re unable to take care of themselves. • You have to have worked for going through job training or a certain minimum amount You cannot claim a tax credit for any adoption expenses that have serving on a jury. been paid for by your employer. If your expenses go beyond the • If you’re unemployed as a assistance your employer provides, they can be claimed as a result of a labor dispute, you tax credit on your income tax return. You might be able to claim can’t get benefits unless the a credit as high as $13,190, and at the same time exclude up to dispute involves a lockout. another $13,190 from your income. If you claim both a credit and • You have to be honest when you an exclusion, they cannot both be for the same expense. apply for benefits.

AmericaAn PaAyroll AssociaAtion Chapter 6 • YOUR RIGHTS AND RESPONSIBILITIES IN THE WORKPLACE 6376 how long cAn i collect beneFits? To figure out your base period, count back over Since your part-time job brings DID YOU in some income, each of your You can generally collect unemployment the last five complete calendar quarters that KNOW? weekly unemployment checks benefits for up to 26 weeks per “benefit passed before you filed for benefits. (Calendar quarters are three-month units of time, split up will be smaller than otherwise. year,” which begins on the day you file a As a result, it will take you longer as follows: first quarter: January-March; second claim for benefits. If you still hold a part-time to collect your total benefits. job, the number of weeks you can collect quarter: April-June; third quarter: July-September; benefits might be extended, though your fourth quarter: October-December.) Your base period is the first four of those quarters. total benefits won’t change. During periods of 2. A percentage of your average weekly wage Suppose you were laid off on February 13, high unemployment, the federal government during a certain part of your base period. might grant an emergency extension of your 2014, and filed a claim one week later. The last five complete calendar quarters that passed Your total unemployment benefits per year benefits. Once you’ve received all of your before you filed your claim run from October are limited to 26 times the weekly benefit benefits for the year, you can’t file a new claim 1, 2012, to December 31, 2013. The first four amount, or to a fraction of your total base until your next benefit year arrives. of those quarters, from October 1, 2012, to September 30, 2013, is your base period. period wages. how is my beneFit Amount cAlculAted? Some states have adopted a different base do PArt-time emPloyees get beneFits? The amount of unemployment period that consists of the four quarters If you have been laid off from a part-time job, benefits you’ll receive depends immediately preceding the employee’s job yes, you are entitled to benefits. You can also on two factors: loss, which often leads to higher benefits. receive unemployment benefits if your hours at 1. How much you earned Your weekly benefit amount will be based work have been reduced, as long as you’re not during your “base on one of the following: earning more than the weekly benefit amount. period.” 1. A fraction of the wages you earned Any part-time wages you earn while receiving 2. Your state’s during the highest-paid quarter of benefits will be subtracted from your weekly formula for your base period. unemployment check. Some states allow work- determining benefits. sharing plans. Under these plans, employers

AmericaAn PaAyroll AssociaAtion Chapterch 6AP • terYOU 6R •RI yourGHTS rightsAND RES APnONSID resBILITIESPonsibilities IN THE WinOR theKP LworACE KPlAce 6377 can reduce their employees’ hours or days of work, instead of laying off some of their workers. These employees keep their jobs and collect unemployment benefits for the time not worked. Go online other PAyments cAn lower or delAy your beneFits If your employer provides you with certain types of payments when you’re laid Access forms and more information on what you off, your unemployment benefits could be delayed until these payments stop. learned in Chapter 6: These payments include holiday pay, vacation pay, dismissal or severance pay, and any money given to you by your employer to make up for not warning you • Form W-2, Wage and Tax Statement in advance about your layoff. You have to report these payments when you • Schedule EIC apply for benefits. • notice 797, Possible Federal Tax Refund Due to the Earned Income Credit • Social Security Administration • Earned Income Credit • Form SS-5, Application for a Social Security Card • The Family and Medical Leave Act • Department of Labor’s Wage and Hour Division • COBRA, the Consolidated Omnibus Budget Reconciliation Act • Educational assistance • Local unemployment office • Estimated Social Security benefits

AmericaAn PaAyroll AssociaAtion CchapAPter 6 • YOyourUR RIrightsGHTS ANnD RESresPONSIonsibilitiesBILITIES INin THEthe WworORKPLlACE ce 6378 in this chAPter

Go where cash can’t go— electronic pay brings a lot to the table—enjoy immediate receipt of your wages on payday, no more waiting for your check in the mail, worrying about carrying a lot of cash with chAPter 7 the beneFits oF electronic PAy you or standing in long lines and paying fees at check cashing stores. These are just a few of the benefits electronic pay offers.

Plus The benefits of direct deposit. chApter 7 electronic wAge PAyment: go green with your green

Every year, more than 3.5 billion paychecks beneFits oF direct dePosit are issued to America’s 156 million employees, • Your pay goes straight into your bank account. but how you’re paid could be damaging • No waiting in line at the bank drive-through, the environment. Electronic pay offers the idling your car and releasing dangerous following three payment methods to make your ozone-depleting emissions. paycheck more environmentally friendly: • Your money is always there on payday, even • Direct Deposit when you’re on vacation. • Paycards • You won’t have to pay check cashing fees. • Prepaid Reloadable Cards • Most banks offer free ATM cards to access direct dePosit your paycheck anytime, at an ATM or as cash back from a retailer. Fees may apply at Direct deposit works by depositing your other banks’ ATMs. pay directly into your checking or savings • You can check your balance via online, account through a highly secure, electronic smartphone app, telephone, text messaging banking system. Direct deposit is the least (standard data rates may apply), or at an expensive and most reliable way to receive ATM (fees may apply at ATMs). Most banks your pay, and the federal government also offer free services like online transfer of protects bank accounts up to $250,000. funds, bill paying, etc. To sign up for direct deposit, talk to your

company’s payroll department.

AmericgetA nP PAAidyroll And Associ go gAreention chAPter 7 • electronic wAge PAyment: go green with your green 80

beneFits oF PAycArds And PrePAid reloAdAble cArds

they’re FAst they’re convenient they’re sAFe • On payday your wages are immediately • Everyone qualifies; does not require bank • Protected from fraud by the Federal transferred onto your card. account or credit check, regardless of credit Reserve and the payment networks—if your history. card is lost or stolen you are not responsible • No need to rely on others, no more waiting for any fraudulent transactions made with for your check in the mail or going onsite • Access your pay anytime at an ATM or as your card; you’ll get a new card and your during your days off or vacation to pick up cash back from a retailer. Fees may apply. funds are paid back. your check. • Make purchases anywhere debit cards are accepted—shop or pay bills online, by mail or • Some prepaid reloadable cards come with • Get paid on time in emergencies impacting phone. additional protection; for details please air and/or ground delivery of paper visit the website listed on the back of the paychecks. • Check your balance online, via phone, text card, refer to the welcome materials or call messaging (standard data rates may apply), or at an ATM (fees may apply at ATMs). customer service. Some card providers may also offer services • Secure access to your money – your like bill paying and funds transfer. employer cannot see where you spend your • Set up automatic bill payments to ensure you money. don’t fall behind on important monthly bills • No bounced checks, no overdraft fees. and incur late fees. • No need to physically carry all your money • Easily transfer money to your family. after cashing your paycheck. • Organize and prioritize how you spend your money.

AmericAn PAyroll AssociAtion chAPter 7 • electronic wAge PAyment: go green with your green 82 understAnding bAnking Fees

exAmPle oF monthly FinAnciAl service Fees1

1 Sample monthly fee schedule. Fees vary by issuer and provider. One time PAPer PAycheck direct dePosit PAycArd Fees2 PrePAid reloAdAble cArd Fees2 activation fee, ATM fees, transaction fees and reload fees will apply at various reload stations. Your fees and potential savings may vary based on the type of Check Cashing card you select. 7 (4 checks/month @ $500.00 $32.50 - $86.67 $0.00 $0.00 $0.00 - $8.00 2 Based on direct deposit of paycheck each or $2,000.00 total) to a paycard or prepaid reloadable card.

3 Paycards typically do not have a Bill Pay $8.70 $0.00 $0.00 $0.00 - $2.50 monthly fee and allow one free ATM transaction per pay period.

4 Fees on checking and savings Enrollment Fee $0.00 $0.00 $0.00 $0.00 - $18.00 accounts vary. Many banks offer free checking and savings accounts, and will allow free unlimited transactions at $5.00 - $9.95 their own ATM machines. Be aware that 4 3 banks charge an average of $32 per Monthly Fee Not Applicable $0.00 - $7.00 $0.00 (fee may be waived bounced check fee. if you maintain a high balance) 5 The $8 estimate assumes two additional non-paycheck ATM ATM Fees transactions per month at $4/ 4 3 (based on 4 transactions and Not Applicable $0.00 $0.00 $16.00 transaction. Some retailers may offer estimated at $4/ transacation) fee-free transactions at their point-of- sale terminals.

6 MOnTHLY COST $41.20 - $95.377 $0.00 - $7.00 $0.00 - $8.005 $21.00 - $36.456 Other fees may include: Customer Service Calls, $0.00 - $1.50; and Replacement Card Fees, $3.95 - $5.95.

AnnUAL COST $494.40 - $1,144.447 $0.00 - $84.00 $0.00 - $96.00 $252.00 - $455.406 7 Based on check cashing industry fees, which average between 1.5% - 4%.

AmericAn PAyroll AssociAtion chAPter 7 • electronic wAge PAyment: go green with your green 83 index toPic PAge number toPic PAge number toPic PAge number # 401(k) plans ...... 41-43, 48, 66 b back pay awards...... 22 cafeteria plan...... 44 supplemental wages ...... 33 charitable contributions...... 62

403(b) plans...... 41, 43 bankruptcy orders ...... 56 child support creditor garnishments...... 58 withholding orders ...... 55 457(b) plans...... 41, 43 involuntary deductions ...... 53, 55, 59 involuntary deductions ...... 55, 57, 59

A adoption bicycle Child Tax Credit ...... 10 assistance benefits,...... 76 commuting, transportation fringe benefits ...... 47 Form W-4 in-depth ...... 11 changes that affect your benefits ...... 45 bonuses COBRA (Consolidated Omnibus Budget after-tax nondiscretionary ...... 22 Reconciliation Act)...... 74-75, 78 contribution limits ...... 42, 43 supplemental wages ...... 33 deductions ...... 52-62 Understanding Your Pay Stub ...... 28 commissions deductions, cafeteria plan ...... 44 exempt, nonexempt...... 19, 21 deductions, calculating take-home pay ...... 50 c cafeteria plans ...... 44-45 supplemental wages ...... 33 deductions, U.S. Savings Bonds ...... 61 401(k) plans ...... 41-43, 48, 66 What is “Regular Rate of Pay”? ...... 22 involuntary ...... 53-59 calculating after-tax deductions...... 50 Understanding Your Pay Stub ...... 28 calculating pre-tax deductions...... 48 company van union dues...... 61 disability insurance ...... 38-39 transportation fringe benefits...... 47 voluntary...... 60-62 flexible spending accounts ...... 45 health savings accounts ...... 45, 46-47 contributions aggregate withholding method ...... 34 menu ...... 44 catch-up ...... 43, 47 examples ...... 34, 35 tax benefits ...... 47 charitable...... 62 Application for a Social Security Card, Form SS-5 ... 3 catch-up contributions credit union download ...... 78 name change ...... 3, 69 health savings accounts ...... 47 deductions ...... 61 tax-deferred retirement plan limits...... 43 direct deposit ...... 17 awards back pay ...... 22, 33 Centers for Medicare and Medicaid Services ...... 38 creditor garnishments ...... 56, 58-59, 60 supplemental wages ...... 33 changing your name ...... 3, 11, 69

AmericAmericAAnn PPAAyrollyroll AssociAssociAAtiontion chAPter 4Topics • Pre -int AXitalics DeD refeructions to illustrations, or, how toand re tables.Duce the income tAXes you PAy 842 index toPic PAge number toPic PAge number toPic PAge number d deductions disability insurance ...... 38-39 Form W-2 ...... 66-67 after-tax ...... 28, 52-62 cafeteria plans ...... 44 income taxes and ...... 27-37, 47 bankruptcy orders ...... 59 subject to child support withholding ...... 57 calculating after-tax ...... 50 docked pay subject to tax levy...... 55 calculating pre-tax ...... 48 exempt, nonexempt...... 19-20 workers’ compensation benefits ...... 70 charity contributions ...... 62 Family and Medical Leave Act ...... 20 child support ...... 57 furlough ...... 20-21 exempt credit union...... 61 punitive ...... 20 changes that affect your benefits ...... 45 creditor garnishments...... 58 state/local government employee absences .. 20 employee status ...... 19-21 Form 668-W in-depth ...... 54 family and medical leave ...... 72-73 Form W-4, Employee’s Withholding Allowance e earned income credit from federal income tax withholding....10-12, 13 Certificate ...... 10, 11 advance payments ...... 69 involuntary ...... 53-60 Form W-2, Wage and Tax Statement ...... 64-69 F Fair Labor Standards Act (FLSA) ...... 19 pre-tax ...... 40-51 maximum credits ...... 67 online...... 25 punitive ...... 20 Who Can Claim the Earned Income Credit? .... 68 U.S. Savings Bonds ...... 61 Family and Medical Leave Act (FMLA) ...... 70-72 Understanding Your Pay Stub ...... 28 educational assistance benefit ...... 75 exempt status ...... 20 union dues...... 61 online...... 25, 78 voluntary...... 60-62 Employee’s Withholding Allowance Certificate, serious health condition ...... 71, 72 Form W-4 ...... 2, 8-13 dependent care download ...... 14 FICA (Federal Insurance Contributions Act) ...... 35 cafeteria plans ...... 44 Form W-4 in-depth ...... 11 Understanding Your Pay Stub ...... 28 flexible spending accounts ...... 45 Personal Allowances Worksheet ...... 10 Form W-2 in-depth ...... 65 state income tax withholding ...... 14 flat-rate withholding method ...... 33 Form W-4 in-depth ...... 11 Employment Eligibility Verification, Form I-9 ..2, 3-6 flexible spending accounts ...... 45 direct deposit ...... 16-18, 81 download ...... 14 benefits of...... 17, 81 Form I-9 in-depth...... 6 Form I-9, Employment Eligibility Verification ..2, 3-6 Direct Deposit from Coast to Coast...... 18 download ...... 14 Understanding Bank Fees...... 83 employment taxes Form I-9 in-depth...... 6 vs. a paycheck ...... 17 calculating ...... 36, 37, 48 FICA ...... 35

AmericAmericAann PPAayrollyroll AssociAssociAationtion Chapter 4Topics • PRE -inT AXitalics DEDU referCTIONS to illustrations, OR, HO W TOand RE tables.DUCE THE INCOME TAXES YOU PAY 852 index toPic PAge number toPic PAge number toPic PAge number

Form SS-5, Application for a Social Security Card .. 3 unpaid taxes ...... 53 download ...... 78 green card ...... 10 involuntary deductions ...... 53-60 name change ...... 3, 69 gross pay J jury duty ...... 20 Form W-2, Wage and Tax Statement ...... 64-69 calculating ...... 21 earned income credit...... 67-69 taxes and deductions ...... 55 m medical savings accounts...... 45, 46 employer contributions ...... 46, 47 Understanding Your Pay Stub ...... 28 Form W-2 in-depth ...... 65 Medicare ...... 12, 21, 23, 35-37, 38, 41, 44, 64, 74 lost...... 66 h health coverage continuation Calculating Your Gross Pay ...... 21 online...... 78 COBRA...... 74-75 Centers for Medicare and proof of charitable contribution ...... 62 Medicaid Services ...... 38, 39 health savings accounts ...... 45, 46-47 Form W-2 in-depth ...... 65 Form W-4, Employee’s Withholding Allowance cafeteria plan...... 44 Understanding Your Pay Stub ...... 28 Certificate ...... 2, 8-13 identity theft ...... 4 download ...... 14 i minimum wage ...... 21 online...... 14 Form W-4 in-depth ...... 11 Personal Allowances Worksheet ...... 10 income tax ...... 27-37 n name change ...... 3, 12, 69 state income tax withholding ...... 14 (See also Form W-4, Form W-2) after-tax deductions...... 52-61 National Payroll Week ...... 10 Form 668-W, Notice of Levy on Wages, Salary Calculating Your Gross Pay ...... 21 online...... 14 and Other Income ...... 54 liability ...... 13 Form 668-W in-depth ...... 54 Married Persons – Weekly Payroll Period ...... 30 net pay Percentage Method Tables ...... 32 Understanding Your Pay Stub ...... 28 furlough...... 20-21 pre-tax deductions...... 41-52 return ...... 8, 9, 36, 64 noncash wages...... 21 state ...... 2, 14 What is “Regular Rate of Pay”? ...... 22 g garnishments subject to tax levy...... 55 action...... 56 tax-deferred retirement plans ...... 41-45 nonexempt bankruptcy order ...... 56 Understanding Your Pay Stub ...... 28 changes that affect your benefits ...... 45 creditor ...... 56, 58-59, 60 withholding ...... 2, 8, 10-12, 13, 29, 30, 31, 32 employee status ...... 19, 21 multiple ...... 59 Fair Labor Standards Act ...... 19 student loan...... 59 IRS...... 3, 10, 29, 38, 55 family and medical leave ...... 72-73

AmericAmericAann PPAayrollyroll AssociAssociAationtion Chapter 4Topics • PRE -inT AXitalics DEDU referCTIONS to illustrations, OR, HO W TOand RE tables.DUCE THE INCOME TAXES YOU PAY 862 index toPic PAge number toPic PAge number toPic PAge number

overtime pay...... 24 certificates ...... 14 final...... 17 right to work ...... 2-4 nonresident alien ...... 10 flexible spending accounts ...... 45 Form I-9 in-depth...... 5 Form W-4 in-depth ...... 11 Form W-4 ...... 8 Who Can Claim the Earned Income Credit? .... 68 Form W-4 in-depth ...... 11 s salary involuntary deductions ...... 53-60 employee status ...... 19-21 Notice of Levy on Wages, Salary and Other state employee withholding allowance ...... 14 Form 668-W in-depth ...... 54 Income, Form 668-W ...... 55 Understanding Bank Fees...... 83 What is “Regular Rate of Pay?” ...... 22 download ...... 62 Understanding Your Pay Stub ...... 28 Form 668-W in-depth ...... 54 voluntary deductions ...... 60-62 Section 401(k) plans ...... 41-43, 48, 66 vs. direct deposit ...... 17 cafeteria plan...... 44 Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit...... 69 payment methods ...... 82 Section 403(b) plans...... 41, 43 download ...... 78 percentage method...... 29, 31, 34 Section 457(b) plans...... 41, 43 on-call pay o pledge card ...... 62 What is “Regular Rate of Pay”? ...... 22 serious health condition Family and Medical Leave Act ...... 71, 72 pre-tax deductions ...... 40-51 overtime pay ...... 19, 20, 24-25 Understanding Your Pay Stub ...... 28 prepaid reloadable cards ...... 81-82 service charges ...... 23 Understanding Banking Fees ...... 83 P park and ride severance pay transportation fringe benefits...... 47 Q qualifying event supplemental wages ...... 33 COBRA...... 74-75 unemployment benefits ...... 78 parking transportation fringe benefits...... 47 r regular rate of pay shift premiums overtime ...... 24 What is “Regular Rate of Pay”? ...... 22 paycards ...... 16-17, 81-82 What is “Regular Rate of Pay”? ...... 22 Understanding Banking Fees ...... 83 SIMPLE plans retroactive pay tax-deferred retirement plans ...... 42 paychecks...... 15-25 supplemental wages ...... 33 calculating ...... 29, 31, 34, 36, 37, 48 Social Security Administration ...... 3, 38, 64

AmericAmericAann PPAayrollyroll AssociAssociAationtion Chapter 4Topics • PRE -inT AXitalics DEDU referCTIONS to illustrations, OR, HO W TOand RE tables.DUCE THE INCOME TAXES YOU PAY 872 index toPic PAge number toPic PAge number toPic PAge number Form SS-5, Application for a Social Security Card ....3 benefits estimate ...... 69, 78 t take-home pay Form W-2 in-depth ...... 65 creditor garnishments...... 58-59 local offices ...... 14 Social Security tax ...... 35, 49, 50 Form 668-W in-depth ...... 54 name change ...... 3, 69 calculating ...... 37 National Payroll Week website ...... 10 online...... 78 Calculating Your Gross Pay ...... 21 nonexempt status ...... 21 educational assistance benefits ...... 75 pre-tax deductions...... 49, 50 Social Security benefits ...... 38, 66 Form W-2 in-depth ...... 65 subject to tax levy...... 55 benefits estimate ...... 69, 78 workers’ compensation benefits ...... 70 Understanding Your Pay Stub ...... 28 voluntary deductions ...... 60-62 Social Security card ...... 3, 69 Social Security wage limit ...... 35, 36-37 download ...... 78 more than one job ...... 36 tax-deferred retirement plans ...... 41-43 Form I-9 in-depth...... 5 state and local government employees Form I-9 Lists A-C, acceptable documents ...... 6 tax-exempt Direct Deposit from Coast to Coast...... 18 Form SS-5, Application for a Social Security Card ..3 health savings accounts ...... 46 exempt status ...... 20 Form W-4 in-depth ...... 11 organizations, retirement plans ...... 43 overtime pay...... 24 identity theft ...... 4 workers’ compensation benefits ...... 70 name change ...... 3, 12, 69 online...... 14 state employee withholding allowance certificates ...... 14 tax levy ...... 55 Social Security number...... 2, 3, 66, 69 creditor garnishments...... 58-59 download ...... 78 state unemployment and disability insurance Form 668-W in-depth ...... 54 Form 668-W in-depth ...... 54 taxes ...... 38-39 other involuntary deductions ...... 55 Form I-9 in-depth...... 5 part of your pay subject to ...... 55 Form I-9 Lists A-C, acceptable documents ...... 6 student loans ...... 59 unpaid taxes ...... 53 Form SS-5, Application for a Social Security Card ..3 Guaranteed Student Loan Program ...... 59 Form W-2 in-depth ...... 65 involuntary deductions ...... 53 tip credits ...... 23 Tip Credits – How Do They Work? ...... 24 Form W-4 in-depth ...... 11 identity theft ...... 4 supplemental wages ...... 33-35 name change ...... 3, 12, 69 aggregate withholding method ...... 34-35 tipped employees ...... 23 online...... 14 flat-rate method ...... 33 Tip Credits – How Do They Work? ...... 24 Who Can Claim the Earned Income Credit? .... 68 tips ...... 23 Social Security statement Form W-2 in-depth ...... 65

AmericAmericAann PPAayrollyroll AssociAssociAationtion Chapter 4Topics • PRE -inT AXitalics DEDU referCTIONS to illustrations, OR, HO W TOand RE tables.DUCE THE INCOME TAXES YOU PAY 882 index toPic PAge number toPic PAge number toPic PAge number

reporting ...... 23-24 lost...... 66 supplemental wages ...... 33 online...... 78 withholding orders Tip Credits – How Do They Work? ...... 24 proof of charitable contribution ...... 62 child support ...... 55, 59 your W-2 ...... 64 spousal support ...... 59 wage assignments ...... 60-61 wage...... 57 transit passes ...... 47 voluntary deduction ...... 60-62 workers’ compensation insurance ...... 70 transportation fringe benefits ...... 47 wage-bracket health savings accounts ...... 47 method ...... 29, 34, 39 TreasuryDirect ...... 61, 62 withholding tables...... 39, 49 workweek...... 23 exempt, nonexempt status ...... 19-23 u unemployment insurance ...... 38-39 white collar employee overtime pay...... 24-25 exempt status ...... 19 Tip Credits – How Do They Work? ...... 24 union dues ...... 61 subject to tax levy...... 55 withholding allowance...... 8, 64 voluntary deductions ...... 60, 61 calculating income taxes ...... 29-34, 49 Form W-4, Employee’s Withholding Allowance U.S. Citizenship and Immigration Services Certificate ...... 2, 8-13 Form I-9, Employment Eligibility Verification .....3-6 Form W-4 in-depth ...... 11 Form I-9 in-depth...... 5 nonresidents...... 10 Form I-9 Lists A-C, acceptable documents ...... 6 Other Allowances You Might Claim ...... 9 state employee withholding allowance U.S. Savings Bonds...... 61-62 certificates ...... 14 TreasuryDirect ...... 61, 62 withholding methods v voluntary deduction ...... 53, 60-62 aggregate ...... 34 subject to tax levy...... 55 flat rate ...... 33 other ...... 33 w Wage and Tax Statement, Form W-2 ...... 64-69 percentage ...... 29, 31, 34 earned income credit...... 67-69 wage-bracket...... 29, 34, 49 employer contributions ...... 46, 47 Form W-2 in-depth ...... 65

AmericAmericAann PPAayrollyroll AssociAssociAationtion Chapter 4Topics • PRE -inT AXitalics DEDU referCTIONS to illustrations, OR, HO W TOand RE tables.DUCE THE INCOME TAXES YOU PAY 892