What your paycheck and tax brackets really say
The mystery of the missing money
You got a job. It pays a set amount.
But your bank gets less than that number.
Some money is taken out before you ever see it.
A job lists pay as $40,000 a year (an example). How much actually lands in your bank account?
These two numbers each have a name.
Your pay before anything is taken out is your gross pay.
The money that actually reaches your bank is your net pay.
One simple rule ties them together.
Gross Pay - Deductions = Net PayGross pay is the amount before deductions. Net pay is what you take home. (Source: Paper Trails payroll explainer.)
There is a second part to the mystery.
Money leaves each check. Then some comes back later.
Many people get a tax refund once a year.
A tax refund is free bonus money from the government.Tap to reveal
It feels like a gift, so this trips people up. But a refund is your own money coming back. Extra was taken out during the year. The refund returns what you overpaid.
So money goes out, and some finds its way back.
Next we will follow that money and see where it goes.