Navigating Basic Taxation and Paycheck Deductions

Jen receives her first paycheck and is surprised by the amount due to withholdings. Joy explains that withholdings are for taxes and deductions, including federal, state, and local taxes, as well as FICA tax for Social Security and Medicare. Joy also covers voluntary deductions like insurance and 401(k) savings. The video uses humor and analogies, such as comparing a paycheck to a cake, to make the concepts more relatable.

What is deducted from your paycheck before you receive it?

• Withholdings for taxes and other deductions

• Net pay

• Gross pay

• Voluntary contributions only

What might happen if you don't have enough withholdings?

• Increase in net pay

• No impact on taxes

• Owe money at tax time

• Receive a larger refund

What does 'gross pay' refer to?

• Net income

• The amount after voluntary deductions

• The amount after taxes

• The total amount earned before deductions

What does the employer withhold from each paycheck for taxes?

• Nothing, taxes are paid separately

• Only federal taxes

• A portion based on your earnings and tax rates

• A fixed percentage for all employees

What is 'net pay'?

• Your salary before taxes

• Gross income

• Federal tax amount

• The amount after all deductions

What do federal taxes fund?

• State parks only

• Unemployment benefits, education, and more

• Only national defense

• Only your retirement

How do state and local taxes differ from federal taxes?

• They are optional

• They do not fund education

• Rates vary by location

• Only used for national defense

What is FICA tax used for?

• Only for Medicare

• State infrastructure only

• Funding Social Security and Medicare

• Paying for federal employees

What are voluntary deductions?

• Choices like retirement savings and health insurance

• Federal tax withholdings

• Mandatory state taxes

• Automatic charity donations

Why is it important to understand your paycheck deductions?

• Only for tax evasion purposes

• Because it's optional

• To ensure correct withholdings and plan finances

• To avoid paying taxes