Client Misconceptions
A client is angry, saying, "My boss is stealing from me! My gross pay is $1,000, but my check is only $750!
What is this an opportunity to explain mandatory deductions (like taxes and FICA) and the difference between Gross vs. Net Pay.
The "whole pizza" before anyone takes a slice.
What is Gross Pay?
The only government form a client can use to adjust their federal tax withholding.
What is Form W-4?
A client is a "gig worker" (1099) for the first time. This is the main financial shock they'll find on their "paycheck."
hat is that no taxes are taken out, and they are 100% responsible for paying Self-Employment Tax (which is both the employee and employer side of FICA) plus income tax?
Why am I paying for 'FICA'? I'm not 65, and I don't get Social Security! I want to opt-out."
What is FICA (Federal Insurance Contributions Act), a mandatory tax that funds Social Security and Medicare for all Americans, including their future selves?
The non-negotiable taxes that fund your own future retirement and health benefits.
What is FICA?
he primary goal of filling out a W-4 accurately. (Hint: It's not a big refund).
What is to break even (or owe/receive a very small amount) at tax time?
A client's paystub shows a "wage garnishment." This is how you explain what it is and their immediate next step.
What is a legal order for an employer to withhold money for a debt (like child support or a creditor)? The next step is to contact the agency or court listed on the stub.
My coworker and I make the same salary, but her paycheck is bigger than mine. That's not fair, right
What are W-4 Withholdings (like dependents, filing status, or pre-tax deductions), which cause two people with the same salary to have different tax amounts taken out?
The key difference between a Traditional 401(k) and a Roth 401(k) deduction.
What is: Traditional is "tax-free now, pay taxes later," while Roth is "pay taxes now, tax-free later"?
The counseling you give a client who wants the biggest possible tax refund next year.
What is that they are overpaying their taxes with every check and giving the government an interest-free loan?
A client's "YTD" (Year-to-Date) gross pay is much higher than their salary. This is the most likely (and often positive) reason.
What is overtime pay or a bonus?
I'm going to claim 'Exempt' on my W-4 so I get a bigger paycheck. That's a good idea, right? No taxes!
What is a massive tax bill (and penalties) they will owe the IRS next year?
An "invisible" pay raise that lowers your total taxable income, meaning you pay less in taxes and get a benefit.
What is a "pre-tax benefit" (or "pre-tax deduction")?
A client just had a baby. This is the first financial document you should recommend they update at work.
What is their Form W-4?
The two different paystubs a client might receive in the same pay period if they received a regular paycheck and a separate bonus.
What is a "Bonus Paystub" (or "Supplemental Paystub")?
What's the point of a 401(k) deduction? It just makes my paycheck smaller. I'd rather have the cash now
What is a "pre-tax deduction," which is a powerful tool to lower your current taxable income (so you pay less tax today) while also saving for your future?
The two-word term for deductions like health insurance, dental, and an HSA that are taken out before taxes are calculated.
What are "Pre-Tax Deductions"?
The client says, "I have two jobs." This is the most important (and often-missed) step you must advise them to take on their W-4s to avoid a huge tax bill.
What is to use the "Multiple Jobs Worksheet" (or the IRS Estimator) and check the box in Step 2(c) on both W-4s?
A client's "Net Pay" is $0, but their "Gross Pay" is normal. This is the most likely reason (often related to a leave of absence).
What is that they are on Unpaid Leave (FMLA/etc.), but their benefits (like health insurance) are still being paid for, resulting in a "check" that just covers those premiums?