Getting a new job? Just graduating and looking for that milestone job? This is an exciting time! You’re earning money to support yourself and thinking about your future. On your first day, you’ll probably receive a lot of paperwork. Here’s a run-down of some of the more important forms and some things you may want to consider as you're filling them out:
One of the first forms you’ll receive is the W-4, also known as the Employee's Withholding Certificate. It’s an Internal Revenue Service (IRS) form that you fill out so your employer can withhold the correct federal income tax from your pay. Think about how much money you may want to withhold from your check. If you take out too much, you’ll get any surplus as a tax refund; if you don’t take out enough, you may owe taxes. Whatever you decide, just be sure you take all factors into consideration: are you married, do you have a family, are you working another job? You may want to check out the form before you start your job and familiarize yourself with filling it out.
Graduation by Mark Ramsay on flickr CC-BY 2.0 / modified: dollar signs added
One of the best aspects of your new job is getting paid! You will likely be given a form on that first day to fill out to receive your wages or salary by direct deposit. Direct deposit is when your employer sends your pay electronically directly from their bank to your bank account without issuing a paper check. Over 93% of U.S. employees are paid this way according to a 2020 survey. Direct deposit can offer convenience and immediate access to pay—no waiting for a check to clear.
If you want to sign up, you'll typically need to provide the name of your bank, account number, and the bank's routing number so that your employer can get your pay to the correct account. Or you can provide a voided check, which will have that information printed on it. If you don't have a bank account, your employer may be able to provide an alternative.
Another type of paperwork you may receive is related to health benefits—your company may offer options such as a Flexible Spending Account (FSA) or a Health Savings Account (HSA). These tax-advantaged programs allow employees to save money from their earnings to cover some medical expenses not covered by insurance.
FSA savings can be used to pay for a variety of qualified medical expenses or can be set up to cover childcare costs. In general, FSA savings must be spent down each year in the plan, and withdrawals for qualified expenses are usually tax free. The HSA differs in that it was designed for people who are insured under high-deductible health plans (HDHP). If requirements are met, contributions to—and withdrawals from—an HSA account are generally tax free. Employees can also rollover unused funds for future use as needed, and the account is portable, meaning that you can keep it even if you change jobs. For both plans, be sure to read your employer's plan documents carefully to understand all that is required for these plans. For more details, refer to this IRS publication.
Starting a new job is the right time to think about saving for retirement. If your employer offers a 401(k) plan, or other types of retirement plans, you should definitely consider signing up. As an employee, you can contribute a portion of your paycheck directly to this account and your employer may match some, or all, of that amount. There are many tax advantages to a 401(k) plan. Think of it as an investment in your future self!
Starting a new job is exciting and busy. You don't want to be distracted by all the new-hire paperwork required. But you can be prepared by understanding some of the most common forms and benefits related to personal finance you may see as you begin in your new workplace.
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