In nearly every client conversation I have, the topic of taxes inevitably arises. Regardless of political affiliation, one thing is clear: most people don’t feel great about how the federal government manages its budget. A common sentiment I hear is, “I listen to Dave Ramsey, and he says we shouldn’t be giving the government more of our money than we have to. A big tax refund isn’t a gift—it’s a sign something’s off.”

And they're right to question it.

Let’s clarify something: a tax refund isn’t the government being generous. It’s simply the IRS returning money you overpaid throughout the year—money that could’ve been in your pocket instead of sitting, interest-free, with Uncle Sam.

So, how do you stop giving the government more than you owe and keep more of your paycheck?

We begin with the most important financial document most people overlook: your paycheck.

Breaking Down Your Paycheck

Your paycheck is more than just the amount deposited in your account—it’s a map of where your money is going. Let's walk through the major sections:

Earnings

This is your gross income before any deductions.

If you're paid hourly, you'll see a breakdown of hours worked and any overtime. For salaried employees, the amount is typically fixed. You’ll also see a Year-to-Date (YTD) column showing cumulative earnings.

Think of this as your “pre-tax” pay—what you technically earn before anything is taken out.It might even make you say, “Gross! That’s how much I should be taking home?”

Pre-Tax Deductions

These are contributions you make before taxes are calculated, reducing your taxable income.

Common examples include:

• 401(k) EE (Employee Contribution - Pre-tax)

• HSA (Health Savings Account)

Here’s where strategy comes in. If you're in the 22% tax bracket, and you contribute $125 to your 401(k) and $125 to your HSA, you reduce your taxable income by $250, saving $55 in federal taxes, plus Medicare and Social Security tax savings.

Taxes

This section outlines how much you’re paying to various levels of government.

• Federal Income Tax – Based on your income and filing status. This is the tiered system, with rates of 10%, 12%, 22%, 24%, and so on.

• Federal Medicare Tax (Fed Med/EE) – 1.45% of your income, with an additional 0.9% for high earners.

• Social Security Tax (Fed OASDI) – 6.2% up to a wage cap ($176,000 for 2025).

• State or Local Taxes – Varies depending on your location.

Employer-Paid Benefits

This section reflects the benefits your employer pays on your behalf. Common items:

• Health, Dental, Vision Insurance

• Life and Disability Insurance

• 401(k) Employer Match

These don’t reduce your paycheck directly but represent part of your total compensation.

After-Tax Deductions

These deductions happen after taxes are applied. They include:

• Roth 401(k) Contributions – You pay taxes now, but your growth is tax-free.

• Insurance premiums (if not paid pre-tax)

  
  

Pro Tip: If possible, pay for life and disability insurance with after-tax dollars. This ensures that if you ever need those benefits, the payout is tax-free.

Net Pay

This is the bottom-line number—what you actually take home. It’s what hits your bank account and what you live on.

Case Study: Bill and Brenda

Let’s meet Bill and Brenda, a married couple with two kids living in Florida (no state income tax). Brenda stays home, and Bill earns $110,000/year, paid biweekly. He has a high-deductible health plan and contributes the maximum family amount to his HSA.

Biweekly Pay Breakdown:

Bill’s take-home pay is $1,965.60 every two weeks, or $51,105.60 per year. However, here’s the issue: when Bill files his taxes, he discovers that he overpaid by $7,050. He only owed about $5,123, yet withheld over $12,173.

That $7,000 refund isn’t a reward—it’s a loan you made to the government, without interest.

The Fix: Adjust Your Withholding

In Bill’s case, that refund represents an opportunity missed. He could have increased his biweekly take-home pay by $271, or $542 a month—a significant amount for saving, investing, or paying off debt.

The solution? Talk to your payroll department to adjust your federal withholding. Then, consult with a tax professional to ensure your new withholding accurately reflects your personal situation, considering your income, dependents, deductions, and filing status.

At Whitaker-Myers Wealth Managers, our in-house CPAs and knowledgeable financial advisors work closely with clients to fine-tune these numbers.

Final Thought

You work hard for your paycheck—don’t give the government more than you owe. A better understanding of your paycheck can help you make more informed financial decisions, retain a larger portion of your income, and align your taxes with your objectives.

If you're ready to take more control over your finances, schedule a conversation with a financial advisor or tax professional today. Let’s make your money work smarter—starting with your paycheck.