Paycheck Deductions Explained (Part III of III)

This is the third and final blog concerning common paycheck deductions.
Question 3: What Are the Basic Deductions Taken from Employee Paychecks?
The starting point for deductions are Federal Income Tax (FIT on your BOLT pay stub), California Income Tax (CA), Old Age Survivor and Disability Insurance (OASDI), State Disability Insurance (SDI), and Medicare. These are the deductions common to every employee; your particular situation may involve more than these.
We commonly know OASDI as “Social Security.” An additional and significant benefit of working on a W-2 status is that your employer contributes half of this amount on your behalf as part of the employer payroll taxes. Your employer also pays one hundred percent of both your Worker’s Compensation and Unemployment Insurance premiums. In contrast, when you work on a 1099 status, you, the independent contractor, must pay one hundred percent of your OASDI contribution (the “Self Employment Tax”) and will not be covered under either Worker’s Compensation or Unemployment Insurance. When you work as an independent contractor, you incur a great deal of financial risk in the event you get injured or run out of work.
If you want more information on Independent Contractor status and Self Employment Taxes click here.
In summary, being paid as an employee means your employer will deduct a certain amount of money from your paycheck as required by law, and then forward those deductions to the government on your behalf. Additionally, your employer contributes to your Social Security and pays for your Workers Compensation and Unemployment Insurance premiums.

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