When I look back to starting my first job, one of the things that stick out most is the amount of money taken out of my paycheck each and every week. My luck, I was employed by a great company in the tax industry Liberty Tax Service®. (Yes taxes can be fun!) Being around the information that affects your pay check as well as the tax return you file at the beginning of each year makes it that much easier to learn the information.
So what does affect your paycheck?
To keep it basic, the amount your paycheck is reduced by is the amount of tax withheld by your employer for federal, state, and local income tax as well as social security benefits. What you may or may not know is that you actually have some control as to how much or how little that amount withheld will be.
One of the initial forms you will fill out for your employer is the W-4 Employee's Withholding Allowance Certificate. This will let your employer know the amount of federal income tax to withhold from your paycheck based off of your “personal allowances”. Realize that everybody’s situation is unique so ask questions to your Human Resources staff if unsure about anything to make certain you are filling it out properly.
As you learn more about it and life situations change that influences your tax circumstances, you will be able to update your W-4 to reflect what is going on. Marriage? Children? Multiple Jobs?
I see a lot of people learn the hard way filing their tax return unaware that their refund or balance due is affected by the allowances taken throughout the year. So take ten minutes to download the W-4 and read up on the information. You will be better off knowing your tax outcome when you receive your W-2 Wage and Tax Statement in January, run to file your tax return, and understand why the amount came out to be what was it was.