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What is net income?

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Net income is the amount of money an individual earns after all taxes and deductions have been subtracted from their gross income.

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What is gross income?

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Gross income is the total earnings before any deductions or taxes are taken out.

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What are deductions?

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Deductions are amounts that are subtracted from gross income, such as taxes, retirement contributions, and health insurance premiums.

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How do you calculate net income?

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Net income is calculated by subtracting total deductions from gross income.

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What is the difference between net pay and gross pay?

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Net pay is the amount received after deductions, while gross pay is the total earnings before any deductions.

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What is a paycheck?

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A paycheck is a document that an employer gives to an employee as payment for work done, typically detailing gross pay, deductions, and net pay.

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What is the purpose of withholding taxes?

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Withholding taxes are deducted from an employee's paycheck to cover income tax obligations, ensuring that taxes are paid throughout the year.

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What is overtime pay?

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Overtime pay is additional compensation for hours worked beyond the standard workweek, typically calculated at a higher rate.

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What is a W-2 form?

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A W-2 form is a tax document that employers send to employees, summarizing their earnings and tax withholdings for the year.

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What is the significance of understanding net pay?

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Understanding net pay is crucial for budgeting and financial planning, as it represents the actual income available for spending.