3. Identify federal income tax deductions

Federal income tax often accounts for the largest amount withheld from your pay. On your stub, this deduction may be labeled “FIT” or “Fed Wt.”

The amount withheld depends partly on the number of “allowances” you claim on the W-4 form that you fill out when you are hired. You get an allowance for each dependent, such as a spouse or child.

An example:

• Imagine a single person who earns $32,000 in salary per year. Suppose this person is paid weekly. The gross pay per week is $32,000 divided by the 52 weeks in a year:
  Gross pay: $32,000.00 ÷ 52 = $615.38
• By current rates, this person would owe about $3,000 in federal income tax for the year. To find the FIT deduction from each paycheck, divide $3,000 by the 52 weeks in a year:
  FIT deduction: $3,000.00 ÷ 52 = $57.69