Tax Withholding and the W-4
01.Completing Form W-4
When starting a W-2 job, you must fill out a W-4 form. This form tells your employer how much tax to deduct from your paycheck. If you withhold too little, you will face a surprise bill on tax day. If you withhold too much, you are giving the government an interest-free loan.
02.Adjusting for Dependents
The W-4 asks about your spouse and children. Claiming dependents reduces the amount of tax withheld, increasing your monthly take-home pay. Review and update your W-4 if your family situation changes.
03.FICA Taxes
On your paycheck stub, you will see deductions for FICA (Federal Insurance Contributions Act). This tax consists of 6.2% for Social Security and 1.45% for Medicare. It is mandatory for all workers and funds future retirement benefits.