01
The paycheck math
Work 40 hours at $18 and you earned $720 gross. After federal withholding, Social Security (6.2%), Medicare (1.45%) and state tax, roughly $596 lands in your account. That gap isn't a mistake — it's the system working normally.
← MODULE PREP
🧾LESSON 06 OF 11
TAXES & PAYCHECKS
Your first paycheck will be smaller than you calculated. Here's exactly why.
W-4s, W-2s, 1099s, withholding, deductions and how to actually file. Learn to read a pay stub line by line before the test module hands you one.
THE FIVE THINGS TO KNOW
02
W-4 in, W-2 out
You fill out a W-4 when you're hired; it tells your employer how much to withhold. In January your employer sends you a W-2 showing what you earned and what was already paid in. Claiming too little withholding means a bill in April; too much means you loaned the government money for free.
03
1099 means nobody withheld anything
Gig work, freelance and side hustles pay you the full amount and hand you a 1099. You owe both halves of Social Security and Medicare — about 15.3% self-employment tax — plus income tax. Set aside roughly 25–30% of every payment or April will hurt.
04
Refund is not a bonus
A refund is your own overpaid money coming back with no interest. Owing a small amount actually means your withholding was accurate. The goal is landing near zero, not maximizing the refund.
05
Filing is mostly free
Most young filers with one W-2 can file free through IRS Free File or a VITA site. Deadline is April 15. Keep your W-2s, 1099s and any tuition or interest forms in one folder — you'll need them for loans and apartments too.
NUMBERS THAT MATTER
40 HRS × $18
$720 → $596
Gross to take-home
FICA
7.65%
Social Security 6.2% + Medicare 1.45%
SET ASIDE ON 1099
25–30%
Nobody withholds it for you
WORDS PEOPLE USE
- Gross pay
- What you earned before anything is taken out
- Withholding
- Tax your employer sends in on your behalf each paycheck
- Standard deduction
- Income the government doesn't tax at all
- Tax bracket
- A rate that applies only to the income inside that range
- Dependent
- Someone claimed on another person's return — often you, at first
DO THIS WEEK
- Find the FICA line on a real pay stub
- Learn the difference between your W-4 and W-2
- Look up IRS Free File
- Start a folder for tax documents
THE MISTAKE MOST PEOPLE MAKE
Spending all of a 1099 payment and discovering in April that a third of it was never yours.
YOU'RE PREPPED
NOW TAKE THE TEST MODULE
Same subject, real scenes, your Life Ready Score™.