Paycheck Deductions

Paycheck Deductions

Tax written on a calendar

The law requires your employer to deduct part of your pay for taxes and other purposes, and pay this money to the federal government or others entitled to receive it.  Paycheck deductions include money that is withheld for federal income tax and FICA.  FICA is short for the Federal Insurance Contributions Act, also known as Social Security.  Nearly all employees in the United States pay FICA tax to provide retirement, disability, and death benefits to workers.  The employer pays half of this tax and you pay the other half. You can collect Social Security if you ever get hurt and cannot work, and when you retire.

In states that have an income tax (Alaska does not!), there will be a state income tax deduction from your paycheck.  If you belong to a union, union dues may also be deducted.

These payroll deductions are mandatory, but your employer should not deduct anything else from your pay unless you authorize it in writing.  An employer may not deduct losses (like money missing from the cash register or broken equipment) caused by your dishonesty or willful misconduct unless you agree in writing that you are responsible.

If your employer does not deduct anything from your paycheck, you should ask why. Does you employer consider you an independent contractor?  If so, you will be responsible for all the taxes yourself.  This may shock you when it is time to file your tax return!

An independent contractor is a self-employed person who provides services for others, but controls his or her own methods for doing the work.  An example may be a person who has a business of designing web pages for others.  Whether a person is an employee or an independent contractor can be complicated because it depends on many different facts.  Among other things, an independent contractor gets to decide his or her own hours and where to work.

If you have questions about wage and hour issues, call the Alaska Department of Labor, Wage and Hour Administration at (907) 269-4900, visit their website at; or contact the U.S. Department of Labor at 1 (866) 487-2365 toll free.