Hey Dad, what's FICA?
"Hey, there's something wrong with my paycheck!" Juan Carlos can't believe it: $168.74?
He's supposed to get $206!
Juan figures he worked 25 hours over a two-week pay period. His salary is $8.24 an hour. That's $206, right?
Sort of. But Juan's not the only one who has claims on what he earns!
And what's true for Juan is true for you!
You Net What's Left
Juan's right. The hourly rate multiplied by the number of hours you work is your income, but it isn't what you get to take home.Quick conversation starter: Ask people about their first jobs!
"When I finally relaxed, I asked my dad what FICA was. It was taking money out of my check and I never even heard of it," says Juan.
His father had explained taxes to him earlier, but Juan admits "it didn't really sink in" until he saw it on his first pay stub. Suddenly, "I realized the difference between how much you earn and how much you really end up with," he says.
Juan's gross income has been reduced by deductions.
Read Your Pay Stub
The pay stub (earnings statement) attached to your check includes your identification information and the pay period (dates you worked for the check). It also lists your gross income, all your deductions, and your net income (the amount you get to keep).
As an example, here's the earnings statement that flipped Juan's switch:
|Employee name:||Juan Carlos|
|Employee's Social Security number:||xxx-xx-xxxx|
|Pay period:||June 12, 2005, to June 19, 2010|
|Federal income tax:||$15.00|
|State income tax:||$6.50|
Are you disappointed at the wages offered to high school students? You aren't the only one...