“Who’s FICA? Why’s he getting all my money?”
Can you agree with Rachel Green from F.R.I.E.N.D.S.? You have a paycheck, you work hard for that money, you sacrifice to make that money but there are more deductions from your paychecks than you’d like to see. What do they all mean?
At KHI Solutions, we receive a lot of questions surrounding payments and paystubs. There are a lot of items on each paystub and knowing what you’re looking at can help eliminate confusion! So to start, what is ‘Gross Earnings’? Gross earnings are what you have earned prior to deductions, like taxes. The ‘Net Pay’ is what is left of your check once all of your deductions are taken out.
To answer Rachel’s question of ‘Who is FICA?’ FICA is the Federal Insurance Contributions Act Tax which is composed of Social Security and Medicare taxes. You might have heard of this referred to as payroll tax because it is a mandatory deduction taken out of every paycheck an employee receives. Currently, FICA takes approximately 7.65% out of your wages per paycheck. Your employer also pays an equal amount of FICA taxes per employee. Ultimately, the IRS receives about 15.3% of each employee’s wages for FICA tax.
The Social Security tax rate for 2017 is currently 6.2% per employee’s wages. These taxes are used to pay for federal programs that provide funding aid for retirement as well as benefits for all the disabled and their dependents. The Medicare tax percentage is currently 1.45% in 2017 which is used to provide medical benefits for certain individuals once they’ve reached 65 years of age to pay for things like healthcare and hospice care. Current and retired employees in addition to their spouses are eligible to receive Medicare benefits once they reach this age.
To make things a little easier on your own personal paycheck from us, we have highlighted a few areas on a mock pay-stub to the right of this page from Paychex Flex. Click the image and follow along with your own paystub! A few things we will cover are as follows:
- What is your ‘Check Date?’
- What is your ‘Chkg ####’ mean?
- What does ‘Net Pay’ means?
- What are ‘Gross Earnings?’
- What are ‘Expense Reimburs?’
- What does the ‘Filing Status’ mean?
- If I have something like ‘Med 125’ on my pay-stub, what does that mean?
- What was I paid this week?
- What have I been paid this year thus far?
- Where is my pay rate?
If you have any questions regarding your pay-stub, please do not hesitate to ask!