I work as a course assistant for a college. On it, it says that my gross pay is $864, and my net pay is $714.70. Apparently, "fed withholding" and "NH state withholding" took away $108.38 and $40.92 from my gross pay.
What is fed and NH state withholding? I know that the FICA amount is used to fund social security and medicare. I thought that first that the withholdings pertained to taxes, but I thought that we paid income tax by filling out forms later on such as the 1040?
It would be quite the trick for (a) the government to run all year and get all its revenue in April when taxes are due and (b) for people to actually save the right amount to be able to cut that check each year.
W2 employers withhold the estimated federal and state taxes along with the payroll (social security) tax from each paycheck. Since the employer doesn't know how many kids you have, or how much mortgage interest, etc you will take deductions for, you can submit a W4 form to adjust withholdings.
The annual Form 1040 in April is to reconcile exact numbers, some people get a refund of some of what they paid in, others owe some money.
If one is self-employed, they are required to pay quarterly estimated taxes. And they, too, reconcile exact numbers in April.
Gross pay is the total your employer is paying you. Net pay is the amount of money you actually received (should match your check or direct deposit), which is gross pay minus deductions (healthcare, 401k contributions, commuter tax-free programs, etc), taxes (as explained already), 401k loan repayments, garnishments (child support, IRS messes, etc).
