Your employer pays you $300 for the week's wages, but your check says $235. What's the difference? The difference, in most cases, is called 'tax withholding.'

Tax withholding refers to the taxes that employers are required to withhold and remit to the government from your paycheck. These include Social Security and Medicare taxes (sometimes called FICA or OASDI taxes), federal, state, and other tax withholdings.

Certain employees may be exempt from some, if not all, of these taxes. Examples of these include ministers, who are always considered self-employed for Social Security purposes, even if they are employees for income tax purposes. Therefore, they may or may not be subject to tax withholdings.

Most employees, however, in the U.S. have at least the FICA and Federal taxes withheld. Depending upon where you live, you might have state withholdings, state disability withholdings, or local withholdings.

Your employer is bound by certain laws that require it to withhold these taxes. Some are percentages of your earnings, such as the FICA taxes. Others are based upon the withholding paperwork that you turn in to your employer.

Every employee should turn in a W-4 form to their employer, properly completed and accurate. From this W-4 form, the employer uses tables or other calculation methods to determine the amount of federal income tax to withhold from your earnings.

Most states with state income tax withholding requirements operate similarly. The employer should use a W-4 form or state equivalent form to determine the amount of state and/or local tax to withhold from your earnings.

Once all of these taxes are withheld, you receive the net amount. Your employer may also have several other items that could be withheld from your check, such as contributions to a company health insurance plan, 401(k) plan, garnishments ordered by the courts for child support and the like, or voluntary withholdings, such as contributions to a savings account you have chosen. However, these are additional withholdings to the income tax withholdings required by law.

The FICA taxes are designed to contribute toward your retirement under the U.S. Social Security system. By contributing these taxes, you are building a reserve (so to speak) so that when you need to retire, you will qualify for retirement funds to help you make a living at that time.

As far as the income taxes, the employer will issue you a W-2 form at year-end which shows your earnings and withholdings. You can then complete your income tax return and may be due a refund of some or all of certain taxes withheld.

This may not be a great consolation week by week, as you see those amounts withheld. But at least it can give you hope as you look forward to next spring and future retirement years.