Frequently Asked Questions
WHEN YOU GET A JOB
Congratulations! Your job hunt has paid off. Now get ready for all the paperwork. On your first day, you're going to have to fill out several forms. You have to prove that you can legally work in the United States, and you have to provide information your employer needs to calculate your taxes. Once you get these forms filled out, your employer will keep them in the human resources department.
First, you'll have to give your employer your social security number. You employer will want to make a copy of your social security card, so remember to take it with you.
Next, you'll have to fill out Form I-9, the Employment Eligibility Verification form. This form proves you can work in the United States.
Then comes Form W-4, the Employee's Withholding Allowance Certificate. Your employer uses this form to calculate the federal taxes you owe each pay period. These taxes are automatically subtracted from each paycheck.
If you live in a state with a state income tax, you might have to fill out another form like the W-4. This "state withholding allowance certificate" makes it possible for your employer to figure your state taxes.
Getting Started: Your Social Security Number (SSN)
When you show up at work the first day, bring your social security card. You're going to need your social security number (SSN) to fill out several of the forms mentioned above. Your SSN is a nine-digit number, arranged in the following way: 000-00-0000.
Proving Your Right to Work: Immigration and Naturalization Service Form I-9, Employment Eligibility Verification
When you go to work you have to prove your identity and your right to work in the United States. Federal law requires employers to do everything they can to make sure they don't accidentally hire illegal aliens. Your employer will check your documentation to make sure it's genuine, and to be certain that you're legally allowed to work here. No matter what your nationality is, your employer will want to look over your documents within your first three days of work.
Paying Your Fair Share: Form W-4, Employee's Withholding Allowance Certificate
This is another form you're going to have to fill out, either on or before the first day of work. The information you give your employer on Form W-4 will be used to figure out how much money will be withheld in federal taxes from each of your paychecks. Submit this form to your employer right away. If you put it off, your employer will have to withhold the maximum amount of tax from your paycheck! In addition, if your living situation changes in some way after you fill out this form, you need to file a new W-4.
- What's the purpose of the W-4 form?
- What are withholding allowances?
- How are nonresident aliens handled?
- Can you claim to be exempt from federal income tax withholding?
- When do I have to submit a new W-4 form?
- What if my employer rejects my W-4?
- How often will I get paid?
- How do I view my paystub online?
- What is direct deposit? How can it benefit me?
- How do I sign up for direct deposit?
- What if I quit my job or am laid off?
The Wage-Hour Laws
If you're a "nonexempt" employee, you're covered by the federal Wage-Hour Law, or Fair Labor Standards Act (FLSA). This law requires an employer to pay you at least minimum wage, along with a certain overtime rate. Many states have passed their own laws relating to minimum wage and overtime pay requirements. If you ever find yourself covered by both a federal and a state law, your employer has to obey the law that's more favorable to you, the employee. For example, suppose your state has its own minimum wage law. If this wage is higher than the federal minimum wage, your employer has to pay you the state wage.
- What does it mean to be an "exempt" or "nonexempt" employee?
- What is your "regular rate of pay?'
- What is a workweek?
- How does overtime pay work?
Income and Employment Taxes
If you hold a job in the United States, you've got to pay federal income and employment taxes on all your wages. Depending on what state you live in, you might also have to pay state income taxes. Some counties and cities have income taxes, as well. Your employer collects these taxes from you by withholding part of your paycheck and sending this money directly to federal, state, and local governments.
- What do all those numbers on my pay stub mean?
- What are income taxes?
- How do I calculate income taxes?
- What are employment taxes?
- How do I calculate social security and Medicare taxes?
Social Security Summary
Your social security benefit is a percentage of your earnings averaged over most of your working lifetime. If you work for someone else, your employer withholds social security and Medicare taxes from your paycheck, matches that amount, sends those taxes to the IRS and reports your earnings to the SSA. If you're self-employed, you pay your own social security taxes when you file your tax return, and IRS reports your earnings to SSA. There are five major categories of benefits paid through your social security taxes: retirement, disability, family benefits, survivors and Medicare. If you need specific information about any social security program, call the toll free number, 1-800-772-1213, or visit their web site.
The Centers for Medicare and Medicaid Services (CMS) administers Medicare, the nation's largest health insurance program, which covers 39 million Americans. Medicare provides health insurance to people age 65 and over and those who have permanent kidley failure and certain people with disabilities. If you have questions about eligibility, call the toll free number 1-800-325-0778 or visit their web site.
Assuming you understand all the taxes you have to pay, you might be wondering if there's a way you can reduce them. You know you can't claim any more withholding allowances than you already have, and your marital status isn't going to change anytime soon. So what can you do? You may want to take advantage of "pre-tax deductions." These deductions can cut down on your income taxes and increase your take-home pay. When you give your employer permission to make these deductions, this money is subtracted from your paycheck before your wages are taxed. This means your income tax withholding will be based on a lower wage than you started with, resulting in lower taxes. These deductions will appear on you pay stub each payday.
You can use a pre-tax deduction to pay for a retirement plan. You can also buy certain benefits with your pre-tax dollars.
"Tax-Deferred" Retirement Plans
These plans are a great way for you to save money for your retirement. Each payday, you make contribution to one of these plans. This contribution is taken out of your wages before income taxes are withheld. This reduces the amount of your eanrings subject to income tax, lowering your total taxes. (Social security and Medicare taxes are withheld from your contributions, though.)
When you retire, you'll get your contributions back in the form of regular payments from your retirement plan. These payments are subject to income tax withholding. That's what "tax-deferred" means. Income taxes on your contributions to the plan are deferred, or put off, until you get this money back after retirement. The good news: after retirement, you'll probably pay income taxes at a lower rate than you did while you were working. This means you'll still end up paying less income tax on this money than you would have without the retirement plan.
There are many kinds of tax-deferred retirement plans. The three most common plans are the Section 401(k) plan, the Section 403(b) plan, and the Section 457 plan. The university offers the Section 403(b) plan and the Section 457 plan.
Section 403(b) Plan
This is a tax-deferred retirement plan for employees of tax-exempt organizations. This plan is for anyone who works for a public school, a college or university, a religious group, or a public charity. You can contribute either to a "tax-sheltered annuity" or to a "tax-sheltered custodial account."
Contribution limits. In 2007 you can contribute up to $15,500 to your 403(b) plan on a pre-tax basis. Employees who are least 50 years old at any time during the year can contribute an extra $5,000 on a pre-tax basis as a "catch-up" contribution. You employer can also contribute to the plan on your behalf. The grand total of contributions by you and your employer for a single year, both pre-tax and after-tax, can't be more than $45,000 or 100% of your yearly wages (if you earn less than $45,000).
Section 457 Plan (Kentucky Deferred Compensation)
This is a tax-deferred retirement plan for employees of state and local governments.
Contibution limits. In 2007, you can contribute up to $15,500 on a pre-tax basis to your plan. Employees who are at least 50 years old at any time during the year can contribute an extra $5,000 on a pre-tax basis as a "catch-up" contribution. The grand total of contributions can't be more than $45,000 or 100% of your yearly wages (if you earn less than $45,000).
During the last three years before you retire, you might be able to contribute as much as double your elective deferral limit on a pre-tax basis. Your employer may allow you to contribute more than the usual limit during these three years, if you contributed less than your legal limit in previous years. Consult the university's benefit office for details about your specific plan.
Flexible Spending Accounts (FSAs)
Along with many employers, the university offers flexible spending accounts. If you choose to, you can have pre-tax deductions taken out of your paychecks and put into you own flexible spending account. You can then have this money to pay for certain medical, dental, or dependent care expenses that aren't covered by your insurance. To pay for medical expenses, you can take as much money from your account as you will contribute during the entire plan year. In other words, you can actually withdraw more money from the account than you've put into it, but only up to the total amount of your yearly deductions. To pay for dependent care expenses, you can take out only as much money as you've already deposited into the account during the plan year.
Ues it or lose it! You need to spend all the money you've put into your FSA by the end of the plan year. If you don't, any balance remaining in your account will be lost. Be sure to figure out how much money you think you'll need in the account before deciding on the size of your deductions.
Sometimes you choose to have this money withheld. That's called a voluntary deduction, and it can be used to make a variety of payments for university goods and services or to make contributions to a charity, among other things. On the other hand, sometimes money is withheld as a result of an order issued by a court or some kind of government agency. This is called an involuntary deduction, and you have to pay it whether you want to or not. Involuntary deductions can be taken out of your earnings to pay child support, unpaid taxes, and personal taxes.
Whether your after-tax deductions are voluntary or involuntary, they come out of the earnings that are left after all of your taxes have been withheld. After-tax deductions don't affect the amount of taxes you owe.
If you every get hit with an involuntary deduction, you should know that your employer has no choice but to withhold the amount indicated in the court or government order. You employer is then required to send that amount to the person or agency you owe. Any employer that disobeys this type of order will be subject to fines, and will have to pay whatever part of the required amount wasn't taken out of the employee's pay. Involuntary deductions are usually used to pay:
- Unpaid Taxes
- Child Support Withholding Orders
- Creditor Garnishments
- Bankruptcy Orders
- Student Loans
- Other Federal Debts
Not every after-tax deduction is involuntary. You can choose to have wages subtracted from your take-home pay each pay period to make contributions to a charity, or to do various other things. Remember, though, that these after-tax deductions won't lower your taxes or limit your involuntary deductions. Your employer will see to it that all your other deductions are made before turning to any voluntary withholding from your wages. Some of the most common voluntary deductions are:
- Athletic Tickets and Donations
- Microcomputer Purchase
- PPP Usage Fees
- Professional Development Fees
- University Club Dues and Fees
- Optional Benefit Deductions
- Contributions to University and External Charities