Why was Josh's paycheck only $1,100 when he earned $1,900 for two weeks of work?

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Study for the EverFi Financial Literacy Test. Prepare with multiple choice questions and comprehensive insights, each question provides hints and detailed explanations. Equip yourself for success!

The correct answer highlights a critical aspect of understanding paychecks and net income. When Josh earned $1,900 for his work, this represents his gross income, but the amount he actually receives in his paycheck, known as net income, can be significantly less due to various deductions.

Withholding taxes, which include federal and state income taxes, Social Security, and Medicare taxes, are typically taken out of an employee's gross pay before they receive their paycheck. Additionally, there may be other deductions such as contributions to retirement plans, health insurance premiums, and any other benefits Josh might be enrolled in. These deductions can significantly reduce the total amount in his paycheck, explaining why he received only $1,100 instead of the full gross amount he earned.

Understanding the distinction between gross income and net income, along with the impact of deductions, is crucial for individuals when they evaluate their finances and budgeting.

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