Out The Paperwork For Your First Job
After the interview,
salary negotiation, and getting hired, you will probably go to the Human
Resource Department or see the Business Manager to handle some of the
financial details of your job. Here are some of the items you probably
- 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). 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.
- Direct Deposit
- It is a good idea to enroll for this convenience. Instead of getting
your paycheck, you can have your funds go directly into your bank account.
This saves the time of going to your financial institution, waiting
in line and making the deposit. It is also safer and gets your money
working for you even faster.
- Retirement Plan
- If your employer has a retirement plan like a 401(k) plan, be sure
to enroll and participate. That way, you will be setting aside some
savings from each paycheck. You will probably have the ability to decide
how much you want to contribute and how you want your funds invested.
Contribute as much as you can and still be comfortable. Your plan may
also have a provision where the employer matches some or all of your
contribution. Be sure to understand the details and try to get the entire
match. Ask about your investment options and try to diversify into a
few investment options.
- Other Employee
Benefits - Many employers also offer health insurance, life insurance
and disability insurance. These policies are usually much cheaper that
what you could get by buying them as an individual. Health insurance
is almost always a must and the others may be attractive if you need
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. These things take some time and
they will reduce what you have to spend. But, they are very important.