Payroll Deduction Plan

The money that gets snagged from your paycheck before you even get a chance to think about spending it. Some deductions (like tax) are required by law, but others you have to sign up for. For example, you might ask your employer to deduct your retirement account contributions and put them into a retirement account for you.

If you've been promised a $3,000/month paycheck but are only getting $2,200, take a closer look at your pay stub. It should explain what's happening.

Or said another way, for your pay, you get a roll of bills. But some of them go back to mama corporation. Who then gives them back to the government, more or less.

That is, there’s money that is deducted from your payroll before you can get your hot little hands on it. Why? Well, everyone who makes more than a very small amount of money, pays taxes.

And juuusssst so that ya don’t, um, “forget” to pay those taxes at the end of the year, the government has set up corporations with the great pleasure of collecting your taxes from you in small pieces all along the way of your gruelling, grinding year of work.

Most people get paid twice a month or 24 times a year, and most people know roughly what they’ll make that year. Yes. There are variable bonuses.

And company profit-sharing plans...

And sometimes the conversion of stock options to cash, and so on…

But all of those are adjustments that can pretty easily be made on the fly when it comes to payroll deductions. So if you are to pay, say 24 grand in taxes in a year with say 80 grand or so of earnings, then mama corporation will gently deduct a grand from your paycheck each pay period so that, at the end of the year, you have already paid your taxes, more or less.

And this is a good idea, as so many people simply aren’t disciplined enough to save money for their tax bills. And oh so many celebs have gone bankrupt trying to be more clever than the IRS. And yeah. Good luck w that.

So payroll deductions are mostly about taxes. But there are other things that get deducted from your paycheck. Things like IRA contributions - i.e. retirement or savings pension deductions that are tax deferred.

Deductions are taken for Social Security - yeah like good luck ever getting that money back. And they also include deductions for insurance pension contributions, child support, union and uniform dues. Like, seriously, there are deductions for uniforms.

And these deductions fall into two flavors: Government tax deductions, or mandatory. All of the others are voluntary, or at the behest of the employer and the employee. But in the realm of government payroll deductions, the mandated ones include taxes on Medicare, Social Security, and federal income.

But then voluntary deductions are for things like 401k plans, supplemental insurance plans, child support, and other random curveballs for expenses employees might, uh…encounter...