After the interview, salary negotiation, and getting hired, you will probably go to the Human Resources Department or see the Business Manager to handle some of the financial details of your job. Here are some of the items you probably will face:
Income Tax Withholding
Unless you are hired as an independent contractor, every paycheck will have federal and state income tax withheld. By having tax withheld, you will not have to pay everything all at once when you file your tax return. To determine the amount your employer will withhold, you will probably have to complete the IRS Form W – 4. On this form, you will be asked how many exemptions you want to claim. The larger the number of exemptions, the smaller amount that will be withheld. Unless there is something special about your income tax situation, you will probably just want to claim one exemption (yourself).1 Your state may also have a similar form.
Social Security and Medicare Withholding
Your wages are subject to Social Security and Medicare taxes that will be withheld from each paycheck. For 2014, you will pay Social Security tax of 6.2% on your wages up to $117,000 and a Medicare tax of 1.45% on all your wages. Single taxpayers with wages above $200,000 and married taxpayers with wages above $250,000 are also subject to an additional 0.9% Medicare surtax. Your employer pays 6.2% in Social Security tax and an equal amount to your regular Medicare tax. If you are an independent contractor or self-employed, you are responsible for both amounts.
It is a good idea to enroll for this convenient service. Instead of receiving an paycheck, you can have your funds directly deposited into your bank account. This is a more convenient way to receive your paycheck and allows you access to your money faster. If you have questions about setting up direct deposit, contact your local banker.
If your employer has a retirement plan like a 401(k) plan, you can set aside savings from each paycheck to begin saving for retirement. You will probably have the ability to decide how much you want to contribute. Your plan may also offer a provision for the employer to match some or all of your contributions. Be sure to understand the details, and ask about the options available to you.
Other Employee Benefits
Many employers also offer insurance plans for health, life and disability. These policies are usually less expensive than what you could get as an individual.
Plan to spend some time evaluating your options and completing the paper work. Ask questions about anything you do not understand, and if your situation changes, go back and ask more questions. Although it could take some time, it’s important to educate yourself on what’s available to you and make the best decisions for you and your family.