As you\u2019re searching for the perfect caregiving job, you\u2019ll see a range of different pay rates being offered. It\u2019s important to understand that when a family makes a compensation offer, it does not reflect the amount of money that will ultimately go into your bank account. That\u2019s because the IRS says household employees, like yourself, who earn $2,700 or more from a family during the course of the year must have taxes withheld from every paycheck they earn.<\/p>\n\n\n\n
Here’s what you need to know to understand the difference between gross wages and net pay. <\/p>\n\n\n\n
Gross wages, also called gross pay, refer to the total amount of money earned before any taxes or deductions are taken out. <\/p>\n\n\n\n
Net pay, on the other hand, is the amount of money you take home after deductions, such as taxes, insurance, and retirement contributions, have been subtracted from your gross pay.<\/p>\n\n\n\n
\u201cThe amount of money you are offered by a family before taxes are calculated is called gross wages,\u201d says Desiree Leung, VP of operations of Care HomePay<\/a>. \u201cAfter the correct amount of taxes have been withheld, what you put in the bank is called net pay, or take-home pay.\u201d<\/p>\n\n\n\n Families should make you a compensation offer in terms of gross wages, but some are unfamiliar with tax and payroll processes \u2014 especially if it\u2019s their first time hiring a household employee. Because of this, it\u2019s a good idea to clarify that any offer represents a gross wage offer<\/a>. If that is not the case, you can show the family how to use our employee paycheck calculator<\/a> to translate any net pay offer into gross wages. It will also show them the amount of taxes they can expect to pay, which will help them with their budget.<\/p>\n\n\n\n For you as an employee, it\u2019s important you know how much money you\u2019ll take home each week so you can budget for all your personal expenses. Aside from that, your gross wages are used to calculate the benefits<\/a> you receive if you have to file for unemployment. Additionally, the Social Security Administration uses your gross wages to calculate credits you\u2019ll receive toward your eventual retirement benefits. <\/p>\n\n\n\n For the family, the difference matters because the IRS and tax agencies in your state require them to report the money they pay you in terms of gross wages when they file tax returns.<\/p>\n\n\n\nHow can I make sure my pay is handled correctly during interviews?<\/strong><\/h2>\n\n\n\n
Why is the difference between net pay and gross wages important?<\/strong><\/h2>\n\n\n\n