Gross Pay Vs. Net Pay

Topic 15175 | Page 1

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Tractor Man's Comment
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There seems to be a bit of discussion on this topic. I replied to an earlier post. I am copying and pasting my reply here. I hope this will clarify the subject for some people. PLEASE I am not trying to offend anyone that "knows the difference between gross and net". Obviously some do not fully understand the variables involved.

Driver #1- Divorced, now single, pays child support on 1 child. Works for ACME Trucking, earns .40cpm, runs 3000 miles per week. Gross Pay....................$1200.00 Federal witholding.....$ 300.00 Social Sec/Medicare...$ 100.00 State Witholding.........$ 50.00 Health Ins (Kid too!) $ 125.00 Child Support..............$ 150.00 401k.............................$ 25.00 Total deductions........$-750.00

NET PAY......................$ $450.00

Driver #2- Married, 2 Kids, Wife is a Nurse and has KICK A$$ benefits package at work. Works for ACME Trucking, .40cpm 3000 miles per week.

Gross Pay...................$1200.00 Federal withholding..$ 125.00 Soc. Sec/Medicare....$ 100.00 State withholding.....$ 25.00 Health Ins..................$0000.00 401k...........................$ 100.00 Total deductions......$ 350.00

NET PAY.....................$ 850.00

If you will notice, Driver # 2 NETS (or "takes home") $400.00 more per WEEK than Driver #1, AND contributes 4x as much to his/her 401k

Both of these Drivers earn the EXACT same pay. Everyone's circumstances are different. Therefore, GROSS PAY is the only barometer to go by. It reminds me of the scenario I hear from so many people on April 15th. "Hey! Im getting back $2400 dollars on my taxes this year!!! I try to remind them that it was their money in the first place. They just overpaid their taxes by $200.00 per month. Some people get it........most just look at me like I have 2 heads.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

C. S.'s Comment
member avatar
It reminds me of the scenario I hear from so many people on April 15th. "Hey! Im getting back $2400 dollars on my taxes this year!!! I try to remind them that it was their money in the first place. They just overpaid their taxes by $200.00 per month. Some people get it........most just look at me like I have 2 heads.

I understand the concept but I enjoy receiving a tax return vs. getting nothing (or worse, owing taxes). Many people also use it as a means of forced saving for large expenses, since they have no way of accessing it throughout the year.

ITA on the gross/net. My fiancé and I earn the exact same gross pay every week by default. But my net is always lower because I have more deductions.

OWI:

Operating While Intoxicated

6 string rhythm's Comment
member avatar

Everyone's circumstances are different. Therefore, GROSS PAY is the only barometer to go by...

Exactly. When discussing earning potential, gross is best to use for such discussions, and for the reasons you mentioned.

People also need to understand that when trucking companies say, "Our drivers earn $1,200 a week!!!," that it's GROSS. That $1,200 isn't what you're gonna see when they deposit it in your bank account or cut your check.

Tractor Man's Comment
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ITA on the gross/net. My fiancé and I earn the exact same gross pay every week by default. But my net is always lower because I have more deductions.

Thank you! That is the ONLY point I was trying to make. There have been several posts lately asking "How much will my take home pay be during my first year." That is kinda like asking a complete stranger "How old are my Brothers and Sisters". BTW..........In my example, although not in this Business, I was "Driver#1(unfortunately) and my Friend/Co-Worker was "Driver#2. Although not the exact numbers, Identical Salaries and the HUGE disparity in Net Pay. That's all Folks! Now back to your regularly scheduled programming

smile.gif

OldRookie's Comment
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Paycheckcity.com is great for playing what if games with different deductions, number of exemptions, gross pay (number of miles * cents per mile), etc.

England's Comment
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That first example is scary. It's amazing how much can vanish after taxes.

6 string rhythm's Comment
member avatar

That first example is scary. It's amazing how much can vanish after taxes.

Usually a good estimate for determining a working knowledge of what your net might be, in regard to tax deduction, is 25% off of your gross. You can just multiply your gross * .75 and you'll have 25% taken off the top. This is just an average estimate for determining taxes.

Tractor Man's Comment
member avatar
That first example is scary. It's amazing how much can vanish after taxes.

It wasn't as scary as it was depressing. $1100.00 per month in Child Support and Health insurance. I just referred to it as a DIVORCE TAX!!

shocked.pngrofl-3.gif

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