Bellringer

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 $410Fed Witholding Tx $46SS Tax 6.2%, Medicare Tx 1.45%Hlth Insur $34.88, Savings $40Find 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 $820Fed Witholding Tx $134SS Tax 6.2%, Medicare Tx 1.45%Hlth Insur $74, Union Dues $45Find 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 $520Fed Witholding Tx $14SS Tax 6.2%, Medicare Tx 1.45%Hlth Insur $80, Union Dues $40Find 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 & DC.) EXPENSESEXPENSES: Uniforms $329, Licenses

$278, Prof Dues $475, Comm. Costs $1,077

TTL JOB BENEFITSTTL JOB BENEFITS: $56,1021.) 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 & DD.) EXPENSESEXPENSES: Licenses $580, Comm.

Costs $1,793, Tech. Bks $2,057TTL JOB BENEFITSTTL JOB BENEFITS: $78,2991.) 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 & FE.) Current JobCurrent Job Possible JobPossible JobSal.Sal. $41,700$41,700 $45,260$45,260Ben.Ben. 32.5% 32.5% 24% 24% ExpExp $3,180 $3,180 $3,740$3,740Which 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 & FF.) Current JobCurrent Job Possible JobPossible JobSal.Sal. $49,500$49,500 $45,200$45,200Ben.Ben. 29% 29% 34% 34% ExpExp 650+1890+375+480650+1890+375+480

2560+480+590+3802560+480+590+380Which 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

• 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 the taxes from employee paychecks during the year.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 tax If too much withholding or self-employment tax

has been paid, the government will pay back, has been paid, the government will pay back, or refund the difference.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 to $100,000, a tax table must be used to find the tax.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 column The amount where that line and column meet is your tax.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 exemptionsWhat’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 DEDUCTIONTAXABLE 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 incomeOver But not

overThe tax is —

$ -0- $8,000 2% of taxable income8,000 16,000 $160 plus 3% of taxable income over $8,000

16,000 24,000 $400 plus 4% of taxable income over $16,00024,000 32,000 $720 plus 5% of taxable income over $24,00032,000 40,000 $1,120 plus 6% of taxable income over $32,00040,000 48,000 $1,600 plus 7% of taxable income over $40,00048,000 56,000 $2,160 plus 8% of taxable income over $48,00056,000 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 RecordTextbook pg 65 Letters A & B

A.) 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 & DC.) $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$225,000D.) 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 TESTEXTRA 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

• 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

BUSINESS TIP• 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.

BUSINESS TIP• 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 benefitsFind 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