ShmoopTube

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Finance a la shmoop. What are payroll deductions? All right for your pay you

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get a roll of bills but some of them go back to mama corporation who then gives [Money is given to the person]

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them back to mama government more or less. That is there's

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money that is deducted from your payroll before you can get your hot little hands [Deductions highlighted on a payslip]

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on it. Why? Well everyone who makes more than a very small amount of money pays

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taxes and just so that you don't quote forget unquote to pay those taxes at the [Guy stood in front of a vault]

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end of the year well the government has set up corporations with the great [Skyscrapers in a city]

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pleasure of collecting your taxes from you in small pieces all along the way of [Woman looking at bills and sighing]

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your grueling grinding year of work. Well most people get paid twice a month or

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twenty four times a year and most people know roughly what they'll make that year [Pay dates shown on a calendar]

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and yes there are variable bonuses or commissions and company profit sharing [Woman sat at her desk thinking about her salary]

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plans and sometimes the conversion of stock options into cash if you're lucky

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and so on but all of those are adjustments that can pretty easily be

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made on the fly when it comes to payroll deductions so if you are to pay say 24 [Breifcase full of cash]

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grand in taxes in a year within say 80 grand or so of earnings well then mama

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corporation will gently deduct a grand from your paycheck each pay period each

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of those 24 periods so that at the end of the year well you've already paid [Pay deductions shown month by month]

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almost all of your taxes and this is a good idea as so many people simply [Thumbs up]

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aren't disciplined enough to save money for their tax bills and oh so many [Someone putting coins into a piggybank]

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celebs have gone bankrupt trying to be um you know more clever than the IRS and

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yeah good luck with that... So payroll deductions are mostly about

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taxes but there are other things that get deducted from your paycheck

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things like IRA contributions ie retirement or savings pension deductions [List of other taxes deducted]

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that are tax deferred, deductions are taken for Social Security

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you know like good luck ever getting that money back and they also include

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deductions for insurance pension contributions, child support, union and

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uniform dues like seriously there are deductions for uniforms and these

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deductions fall into two flavors government tax deductions or mandatory ones all of [Ice cream cone with mandatory deductions written on it]

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the others are quote voluntary unquote or at the behest of the employer and the [Other cone with voluntary written on it]

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employee but in the realm of government payroll deductions the mandated ones

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include the taxes on Medicare Social Security and federal income like you're

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being taxed to pay for other people as well

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but then voluntary deductions so yeah there are things like the 401k plan [List of mandatory and voluntary deductions]

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supplemental insurance plans you might want child support for your angry [Two people arguing]

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divorced spouse yeah and other random curveballs for expenses employees might [Woman appears with a baseball in an office]

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you know encounter [The balls hits a man on the head]

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