Bellringer
What is gross pay?
Chapter 2
Net Pay
Sec. 2.1 - DEDUCTIONS FROM GROSS PAY (WEEKLY)
• WITHHOLDING TAX – MONEY TAKEN OUT EACH WEEK FOR FEDERAL INCOME TAX
–WITHHOLDING ALLOWANCE – USED TO REDUCE THE TAX WITHHELD – SPOUSE KIDS
•TEXTBOOK PAGE 41 TABLE
Txtbk Pg 42 A & B
A.) Single, $458 wages, 1 withholding allowance claimed.
B.) Married, $514 wages, 2 withholding allowances claimed.
$52$52
$42$42
DEDUCTIONS FROM GROSS PAY
• FICA – 7.65%FICA – 7.65%–SOCIAL SECURITY TAXSOCIAL SECURITY TAX – 6.2% – 6.2% ON ALL GROSS PAY UP TO $80,400–MEDICARE TAXMEDICARE TAX – 1.45% – 1.45% ON ALL GROSS PAY
Txtbk Pg 43 C & D
C.) FICA tax for an income of $24,000.
D.) FICA tax for an income of $89,000.
$24,000 x 7.65% = $1,836$24,000 x 7.65% = $1,836
$89,000 x 7.65% = $6,275.30$89,000 x 7.65% = $6,275.30
Txtbk Pg 43 E, F, G, & H
E.) FICA tax for weekly wage of $460.
F.) FICA tax for weekly wage of $712.44
G.) FICA tax for weekly wage of $1,087.30
H.) FICA tax for weekly wage of $375.88
$460 x 7.65% = $35.19$460 x 7.65% = $35.19
$712.44 x 7.65% = $54.50$712.44 x 7.65% = $54.50
$1,087.30 x 7.65% = $83.18$1,087.30 x 7.65% = $83.18
$375.88 x 7.65% = $28.75$375.88 x 7.65% = $28.75
GROSS PAYGROSS PAY
- - DEDUCTIONSDEDUCTIONS( ( FICA, WITHHOLDING TAX, & OTHERFICA, WITHHOLDING TAX, & OTHER))
= = NET PAYNET PAY
Txtbk Pg 44 I & JI.) Gross Pay $410
Fed Witholding Tx $46
SS Tax 6.2%, Medicare Tx 1.45%
Hlth Insur $34.88, Savings $40
Find the Net PayFind the Net Pay
$410 – 31.37 – 46 – 34.88 – 40 =$410 – 31.37 – 46 – 34.88 – 40 =
= $257.75= $257.75
$410 x 7.65% = $31.37$410 x 7.65% = $31.37
Txtbk Pg 44 I & JJ.) Gross Pay $820
Fed Witholding Tx $134
SS Tax 6.2%, Medicare Tx 1.45%
Hlth Insur $74, Union Dues $45
Find the Net PayFind the Net Pay
$820 – 62.73 – 134 –74 – 45 =$820 – 62.73 – 134 –74 – 45 =
= $504.27= $504.27
$820 x 7.65% = $62.73$820 x 7.65% = $62.73
Review Section 2.1
Textbook Page 45 Problems 15 - 37Textbook Page 45 Problems 15 - 37
Quiz Section 2.1
Workbook Page 13-14 Problems 1-4Workbook Page 13-14 Problems 1-4
BellringerGross Pay $520
Fed Witholding Tx $14
SS Tax 6.2%, Medicare Tx 1.45%
Hlth Insur $80, Union Dues $40
Find the Net PayFind the Net Pay
$520 – 39.78 – 14 – 80 – 40 =$520 – 39.78 – 14 – 80 – 40 =
= $346.22= $346.22
$520 x 7.65% = $39.78$520 x 7.65% = $39.78
Section 2.2Section 2.2BENEFITS AND JOB EXPENSESBENEFITS AND JOB EXPENSES
WAGES
+ FRINGE BENEFITS (aka Employee Benefits)
TOTAL JOB BENEFITS
- EXPENSES
NET JOB BENEFITS
Sec 2.2 Benefits & Job ExpensesSec 2.2 Benefits & Job ExpensesTxtbk Pg 48 A & BA.) Hlth Ins $2,580; Vac&Holidays $3,133; Pd Pension $2,545Vi’s Gross Pay - $31,807
1.) Find the Total Benefits1.) Find the Total Benefits
2.) Find the Total 2.) Find the Total JobJob Benefits Benefits
$31,807 + $8,258 = $40,065$31,807 + $8,258 = $40,065
2580 + 3133 + 2545 = $8,2582580 + 3133 + 2545 = $8,258
Sec 2.2 Benefits & Job ExpensesSec 2.2 Benefits & Job ExpensesTxtbk Pg 48 A & BB.) Benefits = 33% of Gross PayVi’s Gross Pay - $28,089
1.) Find the Total Benefits1.) Find the Total Benefits
2.) Find the Total 2.) Find the Total JobJob Benefits Benefits
$28,089 + $9,269.37 = $37,358.37$28,089 + $9,269.37 = $37,358.37
28,089 x 33% = $9,269.3728,089 x 33% = $9,269.37
Section 2.2Section 2.2BENEFITS AND JOB EXPENSESBENEFITS AND JOB EXPENSES
WAGES
+ FRINGE BENEFITS (aka Employee Benefits)
TOTAL JOB BENEFITS
- EXPENSES
NET JOB BENEFITS
Sec 2.2 Benefits & Job ExpensesSec 2.2 Benefits & Job ExpensesTxtbk Pg 49 C & D
C.) EXPENSESEXPENSES: Uniforms $329, Licenses $278, Prof Dues $475, Comm. Costs $1,077
TTL JOB BENEFITSTTL JOB BENEFITS: $56,102
1.) 1.) Find theFind the Net Job BenefitsNet Job Benefits
$329 + $278 + $475 + $1,077 = $329 + $278 + $475 + $1,077 = $2,159$2,159
56,102 - 2,159 = $53,94356,102 - 2,159 = $53,943
Sec 2.2 Benefits & Job ExpensesSec 2.2 Benefits & Job ExpensesTxtbk Pg 49 C & D
D.) EXPENSESEXPENSES: Licenses $580, Comm. Costs $1,793, Tech. Bks $2,057
TTL JOB BENEFITSTTL JOB BENEFITS: $78,299
1.) 1.) Find theFind the Net Job BenefitsNet Job Benefits
$580 + $1793 + $2057 = $4,430$580 + $1793 + $2057 = $4,430
78,299 - 4,430 = $73,86978,299 - 4,430 = $73,869
Sec 2.2 Benefits & Job ExpensesSec 2.2 Benefits & Job ExpensesTxtbk Pg 50 E & F
E.) Current JobCurrent Job Possible JobPossible Job
Sal.Sal. $41,700$41,700 $45,260$45,260
Ben.Ben. 32.5% 32.5% 24% 24%
ExpExp $3,180 $3,180 $3,740$3,740
Which job offers the greatest net job Which job offers the greatest net job benefits?benefits?
CJ $41,700 + 13,552.50 - $3,180 =$52,072.50CJ $41,700 + 13,552.50 - $3,180 =$52,072.50
52,382.40 – 52,072.50= $309.9052,382.40 – 52,072.50= $309.90PJ $45,260 + 10,862.40 - $3,740 =$52,382.40PJ $45,260 + 10,862.40 - $3,740 =$52,382.40
Sec 2.2 Benefits & Job ExpensesSec 2.2 Benefits & Job ExpensesTxtbk Pg 50 E & F
F.) Current JobCurrent Job Possible JobPossible Job
Sal.Sal. $49,500$49,500 $45,200$45,200
Ben.Ben. 29% 29% 34% 34%
ExpExp 650+1890+375+480650+1890+375+4802560+480+590+3802560+480+590+380
Which job offers the greatest net job benefits?Which job offers the greatest net job benefits?CJ $49,500 + 14,355 - $3,395 =$60,460CJ $49,500 + 14,355 - $3,395 =$60,460
60,460 – 56,558= $3,90260,460 – 56,558= $3,902PJ $45,200 + 15,368 - $4,010 =$56,558PJ $45,200 + 15,368 - $4,010 =$56,558
Review Section 2.2
Textbook Page 51 Problems 15 – 19 Textbook Page 51 Problems 15 – 19 (5pts.),(5pts.), 21 21 (show work - 5 pts.)(show work - 5 pts.)
(10 pts)(10 pts)
Quiz Section 2.2
Workbook Page 15-16 Problems 1-6Workbook Page 15-16 Problems 1-6
(44 pts)(44 pts)
Bellringer
• What are total benefits?
• What are total job benefits?
• What are expenses?
• What are net job benefits?
• Employers take out money for federal Employers take out money for federal income tax from workers payincome tax from workers pay – aka aka witholding taxwitholding tax– The amounts withheld are estimates of the The amounts withheld are estimates of the
tax owed at year’s endtax owed at year’s end.
• The tax year for individuals The tax year for individuals ends ends December 31December 31stst, and the calculation and , and the calculation and pay of federal income tax is due bypay of federal income tax is due by April 15April 15thth..
Sec 2.3 – CALCULATE FEDERAL INCOME TAX (ONE TIME A
YEAR)
BUSINESS TIP
BUSINESS TIP
• Self-employed people must estimate Self-employed people must estimate their income taxes for the year. their income taxes for the year.
• They then pay part of that estimated tax They then pay part of that estimated tax each quarter.each quarter.
Federal Income TaxFederal Income Tax• You must calculate and pay any federal You must calculate and pay any federal
income tax due by April 15 of the next income tax due by April 15 of the next calendar year.calendar year.
• Income earned and taxes due are reported on Income earned and taxes due are reported on a a federal income tax returnfederal income tax return..
• A completed return shows how much you A completed return shows how much you owe in federal income taxes.owe in federal income taxes.
• If the amount withheld from wages was If the amount withheld from wages was larger than what was owed, you should claim larger than what was owed, you should claim a refunda refund..
• If the withholding taxes paid were less than If the withholding taxes paid were less than what you owed, what you owed, you pay the differenceyou pay the difference..
Gross Income includes:Gross Income includes:
• WagesWages
• SalariesSalaries
• BonusesBonuses
• TipsTips
• InterestInterest
Sec 2.3 – CALCULATE FEDERAL INCOME TAX (ONE TIME A
YEAR)
•DividendsDividends•PrizesPrizes•PensionPension•Sale of StockSale of Stock•Profit from a Profit from a businessbusiness
Adjusted Gross Income Adjusted Gross Income
• Gross incomeGross income is the total income in a year. is the total income in a year.• From gross income, you may be eligible to From gross income, you may be eligible to
subtract adjustments to income.subtract adjustments to income.• The amount left is called The amount left is called adjusted gross adjusted gross
income.income.
Adjusted Gross IncomeAdjusted Gross Income = Gross Income = Gross Income –– Adjustments to Income Adjustments to Income
Adjustments to Income:Adjustments to Income:
Are Are subtractionssubtractions from gross income from gross income such as:such as:
• Business LossesBusiness Losses
• Payment to approved retirement planPayment to approved retirement plan
• AlimonyAlimony
• Certain PenaltiesCertain Penalties
Sec 2.3 – CALCULATE FEDERAL INCOME TAX
(ONE TIME A YEAR)
Taxable IncomeTaxable Income
• From adjusted gross income you From adjusted gross income you subtractsubtract the deductions and the deductions and exemptions for which you qualify.exemptions for which you qualify.– The result is your taxable income.The result is your taxable income.
• Taxable incomeTaxable income is the income on which is the income on which you actually pay tax.you actually pay tax.
Taxable IncomeTaxable Income = Adjusted Gross Income = Adjusted Gross Income –– Deductions and Exemptions Deductions and Exemptions
DeductionsDeductions• DeductionsDeductions are expenses that reduce are expenses that reduce
the amount of your taxable income.the amount of your taxable income.– You may You may deductdeduct interest paid on a home interest paid on a home
mortgage, property taxes, state and local mortgage, property taxes, state and local income taxes, medical and dental income taxes, medical and dental expenses, casualty and theft losses, and expenses, casualty and theft losses, and contributions to charities.contributions to charities.
• You may claim a fixed amount called a You may claim a fixed amount called a standard deductionstandard deduction..
• Or, if your actual deductions are more Or, if your actual deductions are more than the standard deduction, you list all than the standard deduction, you list all your deductions on your tax return your deductions on your tax return under under itemized deductionsitemized deductions..
Standard Deduction:Standard Deduction:Single - $4,700Single - $4,700Marrried filing Jointly - $7,800Marrried filing Jointly - $7,800
Itemized Deductions can beItemized Deductions can be::• Interest paid on home mortgagesInterest paid on home mortgages• Property TaxesProperty Taxes• State & Local Income TaxesState & Local Income Taxes• Medical & Dental ExpensesMedical & Dental Expenses• Contributions to CharitiesContributions to Charities• Casualty & Theft LossCasualty & Theft Loss
Sec 2.3 – CALCULATE FEDERAL INCOME TAX (ONE TIME A YEAR)
Calculate your itemized deductions.
If Standardized < Itemized use the ItemizedItemized amount
If Standardized > Itemized use the StandardizedStandardized amount.
ExemptionsExemptions• An An exemptionexemption is an amount of income is an amount of income
per person that is free from tax.per person that is free from tax.– You may claim one exemption for yourself You may claim one exemption for yourself
unless you are claimed as a dependent on unless you are claimed as a dependent on another person’s tax return.another person’s tax return.
– You can also claim one exemption for a You can also claim one exemption for a spouse and one exemption for each spouse and one exemption for each dependent.dependent.
• The amounts allowed for the standard The amounts allowed for the standard deduction and exemptions change deduction and exemptions change often.often.
• The amount used in this book is The amount used in this book is $3,000 $3,000 per exemptionper exemption..
Income Tax DueIncome Tax Due• Employers withhold money for income Employers withhold money for income
taxes from employee paychecks during taxes from employee paychecks during the year.the year.– The amount of tax paid in withholding is an The amount of tax paid in withholding is an
estimateestimate and is probably more or less than the and is probably more or less than the tax the employee actually owes.tax the employee actually owes.
• To find the tax due, you must complete a To find the tax due, you must complete a tax returntax return..– If too much withholding or self-employment If too much withholding or self-employment
tax has been paid, the government will pay tax has been paid, the government will pay back, or refund the difference.back, or refund the difference.
– If too little tax has been paid, you must pay the If too little tax has been paid, you must pay the difference to the government.difference to the government.
Tax TableTax Table• If taxable income is less than If taxable income is less than
$100,000, a tax table must be used $100,000, a tax table must be used to find the tax.to find the tax.– To use a To use a tax tabletax table, find your taxable , find your taxable
income in the “At least . . .but less income in the “At least . . .but less than” columns. than” columns. Pg. 55 in textbookPg. 55 in textbook
– Then read across that line to the Then read across that line to the column that shows the filing status: column that shows the filing status: single, married filing jointly, etc.single, married filing jointly, etc.
– The amount where that line and The amount where that line and column meet is your tax.column meet is your tax.
Sec 2.3 – CALCULATE FEDERAL INCOME TAX (ONE TIME A YEAR)
GROSS INCOME - ADJUSTMENTS TO INCOME ADJUSTED GROSS INCOME- DEDUCTIONS (STANDARD S-$4,700 M-$7,800)
- EXEMPTIONS ($3,000 PER PERSON)
TAXABLE INCOMEUSE TABLE ON PAGE 55
TO FIND INCOME TAX DUE
Txtbk Pg.55 A & BA.) Single Adjusted Gross Income - $65,000 Deductions $2,900 is less than Standard – Take the standard deduction Claims one exemption
What’s his taxable income?
Gross Income -----------Adj. To Income - -----------Adj. Gross Income $65,000Deductions - $ 4,700
$60,300Exemptions - $ 3,000 Taxable Income $57,300
Txtbk Pg.55 A & BB.) Married Adjusted Gross Income - $50,000 Deductions $8,500 is greater than Standard Use the itemized deduction Claims three exemptions
What’s his taxable income?
Gross Income -----------Adj. To Income - -----------Adj. Gross Income $50,000Deductions - $ 8,500
$41,500Exemptions - $ 9,000 Taxable Income $32,500
FEDERAL INCOME TAX FEDERAL INCOME TAX (ONE TIME A YEAR)(ONE TIME A YEAR)
ALLOWABLE DEDUCTION < ADJUSTED GROSS INCOME
OWE FEDERAL TAXES
ADJUSTED GROSS INCOME
- ALLOWABLE DEDUCTION
TAXABLE INCOME
USE TABLE ON PAGE 55 TO FIND INCOME TAX DUE
Txtbk Pg.56 C & DC.) SingleTaxable Income $13,576Withholding Tax $2,184What’s his tax due? Pg. 55Does he owe money or get a refund?
Income Tax Due from Table 2,036Withholding Tax - 2,184
-148Owe Money (If positive owe it)Refund (If negative you get money back)
-148 – Gets a refund of $148 from the gov’t
Txtbk Pg.56 C & DD.) Married filing jointly Taxable Income $23,901Withholding Tax $3,224What’s his tax due? Pg. 55Does he owe money or get a refund?
Income Tax Due from Table 3,589Withholding Tax - 3,224
+365Owe Money (If positive owe it)Refund (If negative you get money back)
+365 – Owes the gov’t $365
Review Sec 2.3
• Wkbk Pg 17 #1-10– (21 pts)
Quiz Sec 2.3
• Txtbk Pg 58 #11-28– (36 pts)
Section 2.4Section 2.4State and City State and City Income TaxesIncome Taxes
•Calculate state and city income taxes using a flat tax rate
•Calculate state and city income taxes using a graduated tax rate
table
Sec. 2.4Sec. 2.4STATE & CITY INCOME TAXESSTATE & CITY INCOME TAXES
2 TYPES – •GRADUATED
•FLAT
**MOSTLY BOTH TYPES USE FEDERAL TAXABLE INCOME
State and City Flat Income State and City Flat Income TaxesTaxes
• Some states and cities tax personal income as a percent of federal taxable income.
• Some tax personal income as a percent of gross income.
• Some use a fixed, or flat taxflat tax rate no matter how much taxable income a person has.– That is, the tax rate is the same for every
person, regardless of the amount of income they earn in a year.
State and City Flat Income State and City Flat Income TaxesTaxes
Textbook pg 60 Letters A & BA.) City Tax 1.5%
Federal Income Tax $34,1001.5% x $34,100 = $511.501.5% x $34,100 = $511.50
B.) State Tax 2.8% Federal Income Tax $29,900
2.8% x $29,900 = $511.502.8% x $29,900 = $511.50
State and City State and City Graduated Income TaxesGraduated Income Taxes
• Some states and cities use a graduated income tax rate like the federal government.–In a graduated tax system, the tax
rate gets higher as taxable income gets larger.
–See table on page 61
Sample Graduated Sample Graduated Tax Rate ScheduleTax Rate Schedule
For taxable income
Over But not over
The tax is —
$ -0- $8,000 2% of taxable income
8,000 16,000 $160 plus 3% of taxable income over $8,000
16,000 24,000 $400 plus 4% of taxable income over $16,000
24,000 32,000 $720 plus 5% of taxable income over $24,000
32,000 40,000 $1,120 plus 6% of taxable income over $32,000
40,000 48,000 $1,600 plus 7% of taxable income over $40,000
48,000 56,000 $2,160 plus 8% of taxable income over $48,000
56,000 64,000 $2,800 plus 9% of taxable income over $56,000
State and City State and City Graduated Income TaxesGraduated Income Taxes
Textbook pg 62 Letters C & DC.) Taxable Income $43,600 Use table on pg. 61 to figure out her
state income tax.$1,600 + (7% of tax. income over $40,000)$1,600 + (7% of tax. income over $40,000)
$1,600 + (7% of $43,600 - $40,000)$1,600 + (7% of $43,600 - $40,000)
$1,600 + (7% of $3,600)$1,600 + (7% of $3,600)$1,600 + (252)$1,600 + (252)
$1,852 is the state income tax owed$1,852 is the state income tax owed
State and City State and City Graduated Income TaxesGraduated Income Taxes
Textbook pg 62 Letters C & DD.) Taxable Income $38,200 Use table on pg. 61 to figure out her
state income tax.$1,120 + (6% of tax. income over $32,000)$1,120 + (6% of tax. income over $32,000)
$1,120 + (6% of $38,200 - $32,000)$1,120 + (6% of $38,200 - $32,000)
$1,120 + (6% of $6,200)$1,120 + (6% of $6,200)$1,120 + (372)$1,120 + (372)
$1,492 is the state income tax owed$1,492 is the state income tax owed
Review Sec 2.4 Review Sec 2.4
• WkbkWkbk Pg 20 #1-4– (9 pts)
Quiz Sec 2.4Quiz Sec 2.4
• TxtbkTxtbk Pg 62-63 #7-21– (30 pts)
– #15–18, 20#15–18, 20 Use Table of pg. 61 for state tax only
2.52.5Cash Receipts and Cash Receipts and Payments RecordsPayments Records
•Keep a cash receipts record
•Keep a columnar cash payments record
Cash Receipts RecordCash Receipts Record
• Cash receipts recordsCash receipts records are written records of money received.– Cash receipts records can be of great help to
persons, families, organizations, and businesses when planning how to use money and when filling out income tax forms.
– Cash receipts records may be kept manually or with a computer, using accounting, spreadsheet, or database software.
Money coming to you.Money coming to you.
Cash Receipts RecordCash Receipts Record
Textbook pg 65 Letters A & BA.) Add up all the cash receipts.
27.8927.89 75.0075.00745.98745.98635.78635.78 50.0050.00
1,534.651,534.65
++
B.) $855.40$855.40
Columnar Cash Payments Columnar Cash Payments RecordRecord
• Cash payments recordsCash payments records are written records of money paid out.– Like cash receipts records, cash payments records
can be kept manually or electronically with computer systems.
• A columnar cash paymentscolumnar cash payments record uses special money columns to place every payment into categories, such as housing, food, and auto.
Money you owe Money you owe
(pay bills)(pay bills)
Columnar Cash Payments Columnar Cash Payments RecordRecord
Textbook pg 66-67 Letters C & D
C.) $391.70$391.70
D.) $1,108.87$1,108.87
Textbook pg 66 Textbook pg 66 Example of a Columnar Cash Payment Example of a Columnar Cash Payment
RecordRecord
Review Sec 2.5 Review Sec 2.5
• TxbkTxbk Pg 68 #8-14– (7 pts)
Quiz Sec 2.5Quiz Sec 2.5
• WkbkWkbk Pg 21-22 #1-6
.
2.62.6 BudgetsBudgets
•Calculate the percent of income spent on expenses
•Prepare a budget
Summarize and Analyze Summarize and Analyze Your Income and ExpensesYour Income and Expenses
• It is very helpful to summarize and It is very helpful to summarize and analyze your income and expenses analyze your income and expenses for the previous year.for the previous year.– That way, you can determine how much
you spent on each type of expense.
Expense PercentagesExpense Percentages
• You can also compare your past You can also compare your past spending to other peoples’ spending spending to other peoples’ spending and you can use the percents to plan and you can use the percents to plan your future spendingyour future spending.– Cash receipts and payments records can Cash receipts and payments records can
be used to identify your past income and be used to identify your past income and expenses.expenses.
Tracer Family Tracer Family Cash Record SummaryCash Record Summary
What % of What % of incomeincome is spent on Food? is spent on Food?
9,521.85 / 75,888.10 = .1254722414 = 9,521.85 / 75,888.10 = .1254722414 = 12.5%12.5%What % of What % of expensesexpenses are spent on Food? are spent on Food?
9,521.85 / 63,930.69 = .1489402038 = 9,521.85 / 63,930.69 = .1489402038 = 14.9%14.9%
Expense PercentageExpense Percentage
A.) 6,400 / 128,000 = .05 = 5%5%
B.) 338,200 / 475,000 = .712 = 71%71%
Textbook pg 70 A & BTextbook pg 70 A & B
BudgetingBudgeting
• BudgetsBudgets are your future spending are your future spending plans.plans.– They help you allocate your future income They help you allocate your future income
to meet your future needs and save for the to meet your future needs and save for the things you want.things you want.
• One way to begin a budget is to project One way to begin a budget is to project next year’s expenses based on the next year’s expenses based on the percent of income spent in the previous percent of income spent in the previous year.year.
BudgetingBudgeting
C.) 4,500,000 * 5% = $225,000$225,000
D.) 5,489 * 2.5% = 137.225 = $137$137
Textbook pg 71 C & DTextbook pg 71 C & D
Review Sec 2.6 Review Sec 2.6
• TxbkTxbk Pg 72-73 #15-24– (14 pts)
Quiz Sec 2.6Quiz Sec 2.6
• WkbkWkbk Pg 23-25 #1-7–
52 pts.
Chapter 2 Integrated ProjectChapter 2 Integrated Project
• WkbkWkbk Pg 27-28 #1-5, #14–
Chapter 2 ReviewChapter 2 Review• TxtbkTxtbk Pg 74-75 #1-16, 18-25
Chapter 2 TestChapter 2 Test
• Open Book 100 pts.Open Book 100 pts.
• Txtbk page 79-82Txtbk page 79-82– Page 79, # 11-17, 19-20– Page 80, #1-10
Tax ProjectTax Project
See Ms. Smock (100 pts)See Ms. Smock (100 pts)
The End The End
TAKE TEST
EXTRA TEST PROBLEM –
VANCE MILO HAD AN EARNED INCOME OF $2,250 LAST YEAR FROM PART-TIME WORK. HE ALSO EARNED $24.15 IN INTEREST FROM A SAVINGS ACCOUNT. HIS FATHER CLAIMED HIM AS AN EXEMPTION ON HIS TAX RETURN. IF VANCE’S EMPLOYER WITHHELD $280 FROM HIS WAGES FOR WITHHOLDING TAXES, HOW MUCH SHOULD VANCE GET BACK AS A REFUND ON HIS FEDERAL INCOME TAXES?
2.) Textbook Page 76-77 Task 1-4Use Excel - Can work in pairs
After Test
Textbook Page 76-77 Task 1-4Use Excel - Can work in pairs
• Pg. 57
• Income tax refunds for single dependents
Income Tax Refunds for Single Dependents
• Many young, single people, such as students, are listed as dependents on someone else’s income tax even though they are employed.
• They are required to pay income taxes on their earnings, even though the tax they actually owe is usually very low.
• That means that usually the federal income taxes withheld from their paychecks are greater than the federal income taxes they owe.
• To claim a refund on taxes paid, you must file an income tax return.
Dependent’s Income• A dependent’s income is grouped into two
categories: earned income and unearned income.
• Earned income is from the dependent’s own labor, such as wages, salaries, and tips.
• Everything else is unearned income, including interest and dividends.
BUSINESS BUSINESS TIPTIP
BUSINESS BUSINESS TIPTIP
• A A head of householdhead of household is an unmarried or is an unmarried or legally separated person who pays legally separated person who pays more than half the cost of keeping a more than half the cost of keeping a home for a dependent father, mother, home for a dependent father, mother, or child.or child.
FEDERAL INCOME TAX (ONE TIME A YEAR)
EARNED INCOME + $250ALLOWABLE DEDUCTION (IF LESS THAN $800 GO WITH $800, BUT IT CAN’T BE MORE THAN $4,700)
EARNED INCOME (WAGES)
+UNEARNED INCOME (INTEREST FROM SAVINGS/CHECKING)
ADJUSTED GROSS INCOME
ALLOWABLE DEDUCTION > ADJUSTED GROSS INCOME
OWE NO FEDERAL TAXES
ALLOWABLE DEDUCTION < ADJUSTED GROSS INCOME
OWE FEDERAL TAXES
Chapter 2
Net Pay
2.1 Deductions from Gross PayFind federal withholding tax deductions
Calculate social security and Medicare tax deductions
Calculate total deductions and net pay
Federal Withholding Tax Deduction
• Deductions
• Withholding taxes
• Withholding allowance
Deductions• Deductions are subtractions from gross
pay.
Withholding Taxes• Governments require employers to deduct
money from employee wages for income taxes, or withholding taxes, plus social security and Medicare taxes.
• The amount of withholding tax depends on a worker’s wages, marital status, and number of withholding allowances claimed.
Withholding Allowance• A withholding allowance is used to reduce
the amount of tax withheld.
• Workers may claim one withholding allowance for themselves, one for a spouse, and one for each child or dependent.
Withholding Table • To find the amount withheld from a
worker’s wages, you can use an income tax withholding table prepared by the government.
Sample Withholding Tables
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• Congress changes the federal income tax rates from time to time.
• You can find the latest federal withholding tax rates at www.irs.gov.
Social Security and Medicare Tax Deductions
• The tax for social security is part of the Federal Insurance Contributions Act and is also called the FICA tax.
FICA Benefits• Disability benefits for workers who are disabled
and unable to work• Medicare, which provides hospital insurance for
some disabled people and for people over 65• Retirement benefits for people who are at least
62• Survivors’ benefits, which are paid to spouses
and dependent children when a social security recipient dies
FICA Tax Rates• FICA tax rates and the maximum wages on
which the taxes are charged are set by Congress and may change from time to time.
• The overall tax rate of 7.65% is used in this text. – Social security tax rate of 6.2% applied to a maximum
wage of $87,900– Medicare tax rate of 1.45% applied to all wages.
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• People who work for themselves must also pay FICA taxes on yearly net earnings.
• The tax rates for the self employed are twice the rates paid by employees because the self-employed person must pay the employee and employer shares.
Total Deductions and Net Pay
• In addition to withholding, social security, and Medicare taxes, other deductions may also be subtracted from gross pay, such as union dues, health and life insurance, and government bonds.
• After all deductions are subtracted from total wages, or gross pay, an amount remains that is called net pay, or take-home pay.
Gross Pay – Deductions = Net Pay
Statement of Employee Earnings
and Payroll Deductions
2.2Benefits and Job Expenses
Find total job benefits
Find net job benefits
Compare the net job benefits of jobs
Total Job Benefits• In addition to wages, many employers
provide other things of value called employee benefits or fringe benefits.
Examples of Benefits• insurance
• pensions
• paid holidays
• sick leave
• vacation time
• use of a car
• credit union
• uniforms• parking• discounts for purchases • recreational facilities• child care• education or training
Employee Benefits as a Part of a Job’s Total Value
• Benefits can be worth from 15% to 40% of the amount paid in wages.
• Benefits may be stated in money amounts or as a percent of gross pay.
Benefit 1 + Benefit 2 = Total Employee Benefits
Benefit Rate × Gross Pay = Total Employee Benefits
Total Job Benefits• When you are considering a job offer, the
value of employee benefits should be added to the amount of wages to find the total job benefits.
Gross Pay + Employee Benefits = Total Job Benefits
Net Job Benefits• Almost every job has expenses.
• Examples of job expenses are union or professional dues, commuting expenses, uniforms, licenses, and tools.
• To find net job benefits, subtract total job expenses from total job benefits.
Total Job Benefits – Job Expenses = Net Job Benefits
Comparing Net Job Benefits• When you compare jobs you should consider
many features about each job, not just the net job benefits offered by each job.
• Some things to consider – How much you like the job– Chances for raises and promotions– Chances of layoffs – Job security
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