Tag Archives: financial education

The Beginner’s Guide to Filling Out a W-4

Filling out a 4-page W-4 form can be a huge hassle. It’s not a good idea to rush through it, though, because a small mistake now can mean withholding too much or too little of your salary for covering your taxes. There have also been several recent changes to the W-4, so you may need to make some adjustments to your current form on file.

No worries, though, USAgencies Credit Union is here to help! We’ll walk you through a W-4 form and show you how to fill it out in five easy steps. It’s important to note that only Step 1 and Step 5 are mandatory; the rest are optional.

Step 1: Enter your personal information

First, you’ll need to fill out your personal information, including your legal name, residential address and Social Security number. You’ll also be asked to indicate whether you are filing taxes as a single individual, a married partner filing jointly or as the head of a household. According to the IRS, “Head of household” should only be checked if the filer is not married and pays more than half the costs of keeping up a home for themselves and another qualifying individual.

If you believe you are exempt from filing taxes, you may need to complete Step 1(a), Step 1(b), and Step 5 (you’ll also write “Exempt” in Step 4(c), as indicated below.) Before doing this, though, make sure you are truly exempt, which means you have no tax liability and did not need to file a tax return last year. Mistakenly filing as exempt can land you a giant bill come tax time, complete with penalties for late payments.

If you are a single tax filer or married to a nonworking spouse, have no dependents, only have one job and aren’t claiming deductions or credits beyond the standard deduction, you can skip the next three steps. Just sign and date your form now.

Step 2: Multiple jobs or spouse works

You only need to complete Step 2 if you hold more than one job, or you are married and filing jointly with an income-earning spouse. Be sure to read the instructions carefully. You’ll have three options in Step 2:

  • Use the IRS’s online Tax Withholding Estimator to determine how much to withhold below in Step 4(c).
  • Fill out the Multiple Jobs Worksheet, provided on page three of Form W-4, and enter the result in Step 4(c), as explained below. The IRS recommends only filling out the worksheet on one W-4 form per household, entering only the result of the highest-paying job.
  • You can check off this box on the W-4 form if there are only two jobs in total and both jobs have similar pay.

Step 3: Claim dependents (if applicable)

If you have multiple jobs, or if you are married filing jointly and you and your spouse each have a job, you’ll also complete Step 3 on the W-4 form for the highest-paying job.

Step 3 involves some math: If your income is $200,000 or less, or $400,000 or less if you are married and filing jointly, multiply each qualifying child under age 17 by $2,000 and each additional dependent by $500. Add up these numbers and list the total as indicated by Step 3 on the W-4.

Step 4: Make other adjustments (optional)

Step 4 is optional, but you may want to fill it out if you have multiple jobs, or you are married filing jointly and you and your spouse each have a job. If this applies to you, fill out lines 4(a) and 4(b), but only for one of these jobs. Here, too, the IRS recommends filling out these lines on the W-4 form associated with the highest-paying job. These lines can be left blank on your other W-4 forms.

For line 4(a), you’ll tally up all other taxable income not earned from jobs, including interest, dividends and retirement income. This will enable you to deduct the necessary tax out of your paycheck now so you don’t have to pay it later.

For line 4(b), you’ll need to turn to Page 3 on your form and fill out Step 4(b) — Deductions Worksheet. This worksheet will help you determine whether you’re better off taking the standard deduction or itemizing your deductions. You’ll also be able to tally up any other applicable tax deductions, such as student loan interest or deductible IRA contributions.

Once you’ve filled out lines 4(a) and 4(b), you’re ready to fill out line 4(c), which indicates the amount of additional tax you’d like withheld each pay period, such as taxes for a side job you hold as an independent contractor or gig worker. You may have already calculated this number when you completed Step 2 above. If you are exempt from filing taxes, write “exempt” here, as mentioned above.

Step 5: Sign here

Don’t forget to sign and date the W-4 before turning it in to your employer. If you’ve filled it out carefully, you should have just the right amount of money withheld from your paycheck so that you won’t have a huge tax bill to pay in April, and you won’t have a large refund either.

If your life circumstances change and you need to change something on your W-4, you can always make an adjustment. If you get married, have a baby or take on a second job, you’ll need to adjust your W-4 accordingly.

W-4, done!

How to Read a Paystub

Does your paystub puzzle you? Do the myriad boxes with taxes, deductions and credits make you a little dizzy? USAgencies Credit Union is here to demystify things!

Q: My accountant suggests I review my paystub to see if any changes need to be made to the amounts withheld, but I’m finding that to be an impossible task. I always receive my paycheck via direct deposit and I can’t make heads or tails out of the numbers or information on my paystub. Where do I begin?

A: Having your paycheck directly deposited into your checking account can be super-convenient, but it can also lead to being unfamiliar with your paystub. It’s important to review your paystub occasionally to check for possible errors and to review the deductions, as your accountant suggests. No worries, though, USAgencies Credit Union is here to help! We’ll walk you through a typical paystub and break down all the numbers and information so, going forward, you can do it on your own.

Navigating your paystub

Before reviewing the actual numbers, let’s take a moment to explore the way a paystub is structured.

A typical paystub will have your employer’s information in the upper left-hand corner, followed by the pay period for that paycheck. The upper right-hand corner will be stamped with the date the payment was issued.

Moving downward on the left-hand side, a section titled “Gross Pay,” will list the employee’s gross salary per pay period, along with any additional payments, such as overtime pay and benefits. Running parallel to these numbers will be two columns, one labeled “Current,” and the other labeled “YTD,” or year-to-date.

The right side of the paystub will be designated for tax information and deductions. Each of the items listed here will have separate numbers for current amounts and YTD.

Finally, the paystub will summarize all the information and provide a total for net pay.

Now let’s talk about what each of these items means.

Gross pay

Gross pay refers to the total sum of money earned in a pay period before taxes or deductions are withheld. This number represents the employee’s taxable income for the pay period.

The columns labeled “Current” and “YTD” help the employee track how much they’ve earned and paid in taxes and deductions for the pay period, and for the entire year through the respective pay period.

The “Gross Pay” section often includes the employee’s rate per hour and the number of hours worked in the pay period. When multiplied, these two amounts should be equal to the total gross pay.

There may also be various other payments listed here, such as overtime pay, bonuses and commissions.

Taxes

In this section, the paystub lists the various taxes the employee and employer pay each pay period.

Here are the most common taxes listed on paystubs:

    • Federal income tax. Uncle Sam takes a bite out of every employee’s paycheck. The employer will use several pieces of information to determine an employee’s annual tax liability, including the employee’s marital status, income level and the amounts of allowances listed in their W-4. The estimated tax liability will be divided by the number of pay periods in a year to reach the amount that appears on the paystub. The employer will send this tax directly to the federal government.At the end of the year, the difference between the employee’s actual tax liability and the amount withheld will either be refunded to the employee or collected from them, as necessary. Employees can choose to have more or less money deducted from each paycheck by adjusting the number of allowances listed in their W-4s.
    • State taxes. Some states collect state income tax for each pay period.
  • Federal Insurance Contributions Act (FICA). This refers to the law that requires every employee to contribute to the Social Security and Medicare programs with each paycheck. These contributions sometimes appear separately.By law, every employee must pay 6.2% of their gross income to the Social Security fund. Employers must contribute an additional 6.2% for each employee. Self-employed workers must pay both the worker and employer portions of this tax, effectively doubling their Social Security tax liability.Medicare tax liability is calculated as 1.45% of a worker’s gross income. Employers must pay an additional 1.45% for each employee they hire. Here, too, the self-employed must cover both contributions and pay 2.9% of their earnings to Medicare.Most paystubs will separate the employer’s tax liability for these programs and the employee’s tax burden.

Deductions

Besides for these mandated taxes, many workers will find additional deductions on their pay stubs. These include deductions for insurance coverage; deductions for a health savings account, which allows employees to set aside pre-tax dollars to be used for medical expenses; childcare deductions; and deductions for retirement savings plans, including contributions to a 401K or IRA account.

Some paystubs will include a sub-section for employer contributions. This refers to any employer-sponsored contributions for retirement, healthcare costs and other benefits.

In summary

The final section of a paystub will summarize all the information listed above it and highlight the employee’s net pay, or the amount of money the employee will actually see on their paycheck. This section will also list any reimbursements, or money the business owes the employee for using their own funds for business-related expenses. In addition, the summary will include gross earnings, deductions and contributions and finally, the actual check amount.

Now that you know what each item on your paystub means, you can easily review it and check it for errors. You work hard for your money — don’t lose out from a careless mistake.

All You Need To Know About Home Loans

Here at USAgencies Credit Union, we provide a variety of products and services to meet your specific financial needs and in the most ideal ways possible. One such example is home loans. Let’s take a closer look at how its application process works.

What is a home loan?

A home loan, or a mortgage, enables you to purchase a home without having to foot all the cash out of your pocket when purchasing. You will, however, need to make a down payment, which is typically between 3.5-20% of the home’s appraised value, along with closing costs and some other fees. The lender then finances the rest of the purchase. You’ll repay the loan, along with interest, over the course of (generally) 15 to 30 years.

Are all home loans alike?

Before you get started, you’ll need to choose a mortgage type. A conventional loan will necessitate a 5-20% down payment on the home. There’s also an FHA loan, which only requires a down payment of 3.5%, but necessitates mortgage insurance. If you’re a military veteran, consider obtaining a VA loan, which lets you buy a home with zero down payment.

Once you’ve chosen the kind of loan which is best for your scenario, you may be given a choice of repayment arrangements for that loan. Here are the three common types of mortgages:

  1. 30-year fixed-rate mortgage. The interest rate on this 30-year mortgage will remain fixed no matter the changes to the national rate.
  2. 15-year fixed-rate mortgage. This mortgage will also have a fixed interest rate, but the term lasts just 15 years. The monthly payments will be higher, but the overall interest paid over the course of the loan will be significantly lower.
  3. Adjustable-rate mortgage (ARM). An ARM gives the borrower a lower interest rate in the early years of the loan, and then a gradual increase (adjustment) in rate over the rest of the life of the mortgage.

What do I need to know before applying for a home loan?

A home is likely to be the largest purchase you will ever make. To qualify for one, you will need to prove that you are living a financially responsible life and that you can afford the monthly payments.

The primary way lenders gauge your financial responsibility is through your credit score. This number is like a grade that tells lenders how you’ve handled your past credit card accounts and other debts. It will include the length of time you’ve had your credit cards and loans open, the timeliness with which you’ve made your payments, the trajectory of your debt and the amount of available credit you might use. Most lenders will only grant a home loan to borrowers with a credit score of 650 or higher. You can check your score for free with My Credit Score in our Online and Mobile Banking. You might also consider ordering a free credit report from all three major credit bureaus once a year at AnnualCreditReport.com.

During the time leading to your mortgage applications, make sure to pay all your bills on time, don’t open new credit cards and work on paying down overall debt. A higher credit score will help you get approved quicker and it will net you a lower interest rate on your loan.

Another crucial factor in determining your eligibility for a mortgage is your debt-to-income ratio, or your DTI. Lenders want to know how big your collective outstanding debt will be in relation to your income if you receive the home loan. Most lenders will only allow a maximum DTI of 36%.

When should I apply for a home loan?

While you won’t need the loan until you are ready to close on a house, it’s a good idea to start the process before you begin house-hunting. Your lender will let you know whether you can expect to be approved for a loan and will provide you with an estimate of how much house you can afford so you don’t face disappointment later.

When initially applying for a home loan, ask your lender for a letter of pre-approval. This letter confirms you are preapproved for a home loan up to a specific amount. Having this letter in hand shows real estate agents and sellers that you are serious about buying. Most pre-approvals are only good for 60-90 days, so make sure you’re ready to start house hunting before you get yours.

How do I apply for a home loan?

To apply for a home loan at USAgencies Credit Union, connect with us to help you get started. Make sure all of your financial paperwork is in order and hold onto all important financial documents in the months leading up to your application.

To make it easier, we’ve created a list of the information and documents you’ll need:

  • Name of current employer, phone and street address
  • Length of time at current employer
  • Official position/title
  • Salary including overtime, bonuses or commissions
  • Two years’ worth of W-2s
  • Profit & loss statement if self-employed
  • Pensions and Social Security check stubs
  • Proof of child support payments
  • Copies of alimony checks
  • Statements for all checking and savings accounts
  • Investments (stocks, bonds, retirement accounts)
  • Proof of any gifted funds from relatives
  • Car loan information

You will also need to explain any blemishes on your financial record; including bankruptcies, collections, foreclosures and delinquencies.


Have more questions about Buying or Refinancing, or ready to get your application started? Connect with us at 503.275.0300 or visit our website. 

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The Money Talk with Kids

National Credit Union Youth Month is here, keeping your kids educated about saving and spending money is crucial for their financial success. Are you looking for ideas to start the money talk? We’ve got some conversation starters for you!

Saving Smart

For the responsible adult who thinks about being prepared for the future, savings are a fixed expense that is built into the monthly budget just like car payments and insurance. For most people, though, this habit does not come naturally. It needs to be acquired and practiced. Teach your kids those saving smarts now when they’re young to help make it a lifetime habit they’ve already mastered by the time they hit their 20s.

Give your kids a clear understanding of why saving is crucial to financial wellness and how to make it happen. Here are some points to cover:

  • Why putting money aside each month is crucial
  • How interest and compound interest work
  • Long-term vs. short-term saving
  • Reasons to save

Conversation starters (For kids under age 9):

  • Let’s say you’ve only got $15 and you want to buy a drone that costs $65. You get $5 a week as your allowance. How can you buy that drone?
  • When did you wait for something and find that it was more enjoyable because you waited for it?
  • Can you think of some things that Mom or Dad saves up for?
  • If you earn 10 cents for every dollar you save, how much money will you earn by putting away $5?

Conversation starters (For kids over age 9):

  • Are you saving up for anything important?
  • Can you think of some things that Mom or Dad saves up for?
  • Have you ever had to pay for something unexpected? How did you come up with the money?
  • Some things we save for are short-term goals, and others are long-term goals. Can you name some of each kind of goal? How will we save differently for each kind?
  • Do you think it’s smart for Mom and Dad to keep money they’re saving under the mattress? Why or why not?

Working It Out

One of the most fundamental financial lessons your kids are going to have to learn is about how you work for your money.

Do your kids understand that every time you pull out a wad of bills or swipe a card to pay for a purchase, that money is directly linked to time you put in at the office? Do they realize all of your money is earned through hard work?

Here’s how to make sure your kids — at any age level — understand this concept.

Goal: Teach your children that money for purchases, whether it’s paid through cash or a card, is earned through hard work. Here are some points to cover:

  • Money is earned through work.
  • Every dollar spent is time you spend working.
  • Any method used to pay for purchases comes from the same source.

Conversation starters (For kids under age 9):

  • What do you think mom/dad does all day at their job?
  • We work to do what our bosses want and need. How do you think our bosses reward us?
  • When we spend money for pizza, groceries, toys or movies, where do you think that money is coming from?
  • This is mom/dad’s paycheck from work. When we give it to USAgencies Credit Union, we have money to spend. Why do you think we put the paycheck in our account at USAgencies Credit Union?
  • When I swipe my credit/debit card, how does that pay the store owner? Where is the money coming from?

Conversation starters (For kids over age 9):

  • Why do you think people work?
  • Do you think people who work harder for their money spend it more carefully?
  • Would you still want that (article of clothing/toy/gadget) if you had to work for it?
  • If you had the choice to work 16-hour days for double the salary of an 8-hour day, would you take it? Why or why not?

We’ve also got a few fun activity pages for your kids to complete.

Youth_activity_pages preview
Download printable worksheets

Youth_activity_pages preview
Download printable worksheets

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Download printable worksheets


Do you encourage your kids to save money? How do they spend their allowance, chore money and money they earn from odd jobs as soon as they have it?

Connect with us to help get your children ready for their first savings or checking account to establish healthy financial habits. Call us at 503-275-0300 Option 4, or email info@usacu.org. Everyone deserves a better banking experience. Get it here.