Transcript Section 2.3 pg 57

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.
$52
B.) Married, $514 wages, 2 withholding
allowances claimed.
$42
DEDUCTIONS FROM
GROSS PAY
• FICA
– 7.65%
–SOCIAL SECURITY TAX – 6.2% ON ALL
GROSS PAY UP TO $80,400
–MEDICARE TAX – 1.45% ON ALL GROSS PAY
Txtbk Pg 43 C & D
C.) FICA tax for an income of $24,000.
$24,000 x 7.65% = $1,836
D.) FICA tax for an income of $89,000.
$89,000 x 7.65% = $6,275.30
Txtbk Pg 43 E, F, G, & H
E.) FICA tax for weekly wage of $460.
$460 x 7.65% = $35.19
F.) FICA tax for weekly wage of $712.44
$712.44 x 7.65% = $54.50
G.) FICA tax for weekly wage of $1,087.30
$1,087.30 x 7.65% = $83.18
H.) FICA tax for weekly wage of $375.88
$375.88 x 7.65% = $28.75
GROSS PAY
-
DEDUCTIONS
( FICA, WITHHOLDING TAX, & OTHER)
=
NET PAY
Txtbk Pg 44 I & J
I.) Gross Pay $410
Fed Witholding Tx $46
SS Tax 6.2%, Medicare Tx 1.45%
Hlth Insur $34.88, Savings $40
Find the Net Pay
$410 x 7.65% = $31.37
$410 – 31.37 – 46 – 34.88 – 40 =
= $257.75
Txtbk Pg 44 I & J
J.) Gross Pay $820
Fed Witholding Tx $134
SS Tax 6.2%, Medicare Tx 1.45%
Hlth Insur $74, Union Dues $45
Find the Net Pay
$820 x 7.65% = $62.73
$820 – 62.73 – 134 –74 – 45 =
= $504.27
Review Section 2.1
Textbook Page 45 Problems 15 - 37
Quiz Section 2.1
Workbook Page 13-14 Problems 1-4
Bellringer
Gross Pay $520
Fed Witholding Tx $14
SS Tax 6.2%, Medicare Tx 1.45%
Hlth Insur $80, Union Dues $40
Find the Net Pay
$520 x 7.65% = $39.78
$520 – 39.78 – 14 – 80 – 40 =
= $346.22
Section 2.2
BENEFITS AND JOB EXPENSES
WAGES
+ FRINGE BENEFITS (aka Employee Benefits)
TOTAL JOB BENEFITS
- EXPENSES
NET JOB BENEFITS
Sec 2.2 Benefits & Job Expenses
Txtbk Pg 48 A & B
A.) Hlth Ins $2,580; Vac&Holidays $3,133;
Pd Pension $2,545
Vi’s Gross Pay - $31,807
1.) Find the Total Benefits
2580 + 3133 + 2545 = $8,258
2.) Find the Total Job Benefits
$31,807 + $8,258 = $40,065
Sec 2.2 Benefits & Job Expenses
Txtbk Pg 48 A & B
B.) Benefits = 33% of Gross Pay
Vi’s Gross Pay - $28,089
1.) Find the Total Benefits
28,089 x 33% = $9,269.37
2.) Find the Total Job Benefits
$28,089 + $9,269.37 = $37,358.37
Section 2.2
BENEFITS AND JOB EXPENSES
WAGES
+ FRINGE BENEFITS (aka Employee Benefits)
TOTAL JOB BENEFITS
- EXPENSES
NET JOB BENEFITS
Sec 2.2 Benefits & Job Expenses
Txtbk Pg 49 C & D
C.) EXPENSES: Uniforms $329, Licenses
$278, Prof Dues $475, Comm. Costs
$1,077
TTL JOB BENEFITS: $56,102
1.) Find the Net Job Benefits
$329 + $278 + $475 + $1,077 =
$2,159
56,102 - 2,159 = $53,943
Sec 2.2 Benefits & Job Expenses
Txtbk Pg 49 C & D
D.) EXPENSES: Licenses $580, Comm.
Costs $1,793, Tech. Bks $2,057
TTL JOB BENEFITS: $78,299
1.) Find the Net Job Benefits
$580 + $1793 + $2057 = $4,430
78,299 - 4,430 = $73,869
Sec 2.2 Benefits & Job Expenses
Txtbk Pg 50 E & F
E.) Current Job
Possible Job
Sal. $41,700
$45,260
Ben. 32.5%
24%
Exp $3,180
$3,740
Which job offers the greatest net job
benefits?
CJ $41,700 + 13,552.50 - $3,180 =$52,072.50
PJ $45,260 + 10,862.40 - $3,740 =$52,382.40
52,382.40 – 52,072.50= $309.90
Sec 2.2 Benefits & Job Expenses
Txtbk Pg 50 E & F
F.) Current Job
Possible Job
Sal. $49,500
$45,200
Ben.
29%
34%
Exp 650+1890+375+480 2560+480+590+380
Which job offers the greatest net job benefits?
CJ $49,500 + 14,355 - $3,395 =$60,460
PJ $45,200 + 15,368 - $4,010 =$56,558
60,460 – 56,558= $3,902
Review Section 2.2
Textbook Page 51 Problems 15 – 19
(5pts.), 21 (show work - 5 pts.)
(10 pts)
Quiz Section 2.2
Workbook Page 15-16 Problems 1-6
(44 pts)
Bellringer
•
•
•
•
What are total benefits?
What are total job benefits?
What are expenses?
What are net job benefits?
Sec 2.3 – CALCULATE FEDERAL
INCOME TAX (ONE TIME A
YEAR)
• Employers take out money for federal
income tax from workers pay – aka
witholding tax
– The amounts withheld are estimates of the
tax owed at year’s end.
• The tax year for individuals ends
December 31st, and the calculation and
pay of federal income tax is due by
April 15th.
BUSINESS TIP
• Self-employed people must estimate
their income taxes for the year.
• They then pay part of that estimated tax
each quarter.
Federal Income Tax
• You must calculate and pay any federal
income tax due by April 15 of the next
calendar year.
• Income earned and taxes due are reported on
a federal income tax return.
• A completed return shows how much you
owe in federal income taxes.
• If the amount withheld from wages was
larger than what was owed, you should claim
a refund.
• If the withholding taxes paid were less than
what you owed, you pay the difference.
Sec 2.3 – CALCULATE FEDERAL
INCOME TAX (ONE TIME A
YEAR)
Gross Income includes:
• Wages
• Salaries
• Bonuses
• Tips
• Interest
•Dividends
•Prizes
•Pension
•Sale of Stock
•Profit from a
business
Adjusted Gross Income
• Gross income is the total income in a year.
• From gross income, you may be eligible to
subtract adjustments to income.
• The amount left is called adjusted gross
income.
Adjusted Gross Income = Gross Income – Adjustments to Income
Sec 2.3 – CALCULATE FEDERAL
INCOME TAX
(ONE TIME A YEAR)
Adjustments to Income:
Are subtractions from gross income
such as:
• Business Losses
• Payment to approved retirement plan
• Alimony
• Certain Penalties
Taxable Income
• From adjusted gross income you
subtract the deductions and
exemptions for which you qualify.
– The result is your taxable income.
• Taxable income is the income on which
you actually pay tax.
Taxable Income = Adjusted Gross Income – Deductions and Exemptions
Deductions
• Deductions are expenses that reduce
the amount of your taxable income.
– You may deduct interest paid on a home
mortgage, property taxes, state and local
income taxes, medical and dental
expenses, casualty and theft losses, and
contributions to charities.
• You may claim a fixed amount called a
standard deduction.
• Or, if your actual deductions are more
than the standard deduction, you list all
your deductions on your tax return
under itemized deductions.
Sec 2.3 – CALCULATE FEDERAL
INCOME TAX (ONE TIME A YEAR)
Standard Deduction:
Single - $4,700
Marrried filing Jointly - $7,800
Calculate your
itemized deductions.
If Standardized < Itemized use the Itemized amount
If Standardized > Itemized use the Standardized amount.
Itemized Deductions can be:
• Interest paid on home mortgages
• Property Taxes
• State & Local Income Taxes
• Medical & Dental Expenses
• Contributions to Charities
• Casualty & Theft Loss
Exemptions
• An exemption is an amount of income
per person that is free from tax.
– You may claim one exemption for yourself
unless you are claimed as a dependent on
another person’s tax return.
– You can also claim one exemption for a
spouse and one exemption for each
dependent.
• The amounts allowed for the standard
deduction and exemptions change
often.
• The amount used in this book is $3,000
per exemption.
Income Tax Due
• Employers withhold money for income
taxes from employee paychecks during
the year.
– The amount of tax paid in withholding is
an estimate and is probably more or less
than the tax the employee actually owes.
• To find the tax due, you must complete
a tax return.
– If too much withholding or selfemployment tax has been paid, the
government will pay back, or refund the
difference.
– If too little tax has been paid, you must pay
the difference to the government.
Tax Table
• If taxable income is less than
$100,000, a tax table must be used
to find the tax.
– To use a tax table, find your taxable
income in the “At least . . .but less
than” columns. Pg. 55 in textbook
– Then read across that line to the
column that shows the filing status:
single, married filing jointly, etc.
– The amount where that line and
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 INCOME
USE TABLE ON PAGE 55
TO FIND INCOME TAX DUE
Txtbk Pg.55 A & B
A.) 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
Deductions
Exemptions
Taxable Income
----------- ----------$65,000
- $ 4,700
$60,300
- $ 3,000
$57,300
Txtbk Pg.55 A & B
B.) 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
Deductions
Exemptions
Taxable Income
----------- ----------$50,000
- $ 8,500
$41,500
- $ 9,000
$32,500
FEDERAL INCOME TAX
(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 & D
C.) Single
Taxable Income $13,576
Withholding Tax $2,184
What’s his tax due? Pg. 55
Does he owe money or get a refund?
Income Tax Due from Table
2,036
Withholding Tax
- 2,184
-148
Owe 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 & D
D.) Married filing jointly
Taxable Income $23,901
Withholding Tax $3,224
What’s his tax due? Pg. 55
Does he owe money or get a refund?
Income Tax Due from Table
3,589
Withholding Tax
- 3,224
+365
Owe 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 2.4
State and City
Income 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. 2.4
STATE & CITY INCOME TAXES
2 TYPES –
•GRADUATED
•FLAT
**MOSTLY BOTH TYPES USE FEDERAL
TAXABLE INCOME
State and City Flat Income
Taxes
• 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 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
Taxes
Textbook pg 60 Letters A & B
A.) City Tax 1.5%
Federal Income Tax $34,100
1.5% x $34,100 = $511.50
B.) State Tax 2.8%
Federal Income Tax $29,900
2.8% x $29,900 = $511.50
State and City
Graduated 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
Tax 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
Graduated Income Taxes
Textbook pg 62 Letters C & D
C.) 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 $43,600 - $40,000)
$1,600 + (7% of $3,600)
$1,600 + (252)
$1,852 is the state income tax owed
State and City
Graduated Income Taxes
Textbook pg 62 Letters C & D
D.) 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 $38,200 - $32,000)
$1,120 + (6% of $6,200)
$1,120 + (372)
$1,492 is the state income tax owed
Review Sec 2.4
• Wkbk Pg 20 #1-4
– (9 pts)
Quiz Sec 2.4
• Txtbk Pg 62-63 #7-21
– (30 pts)
– #15–18, 20 Use Table of pg. 61 for state tax
only
2.5 Cash Receipts and
Payments Records
•Keep a cash receipts record
•Keep a columnar cash payments record
Cash Receipts Record
• Cash 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.
Cash Receipts Record
Textbook pg 65 Letters A & B
A.) Add up all the cash receipts.
27.89
75.00
745.98
635.78
+ 50.00
1,534.65
B.) $855.40
Columnar Cash Payments
Record
• Cash 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 payments record uses
special money columns to place every payment
into categories, such as housing, food, and auto.
Money you owe
(pay bills)
Columnar Cash Payments
Record
Textbook pg 66
Example of a Columnar Cash Payment
Record
Textbook pg 66-67 Letters C & D
C.) $391.70
D.) $1,108.87
Review Sec 2.5
• Txbk Pg 68 #8-14
– (7 pts)
Quiz Sec 2.5
• Wkbk Pg 21-22 #1-6
.
2.6 Budgets
•Calculate the percent of income
spent on expenses
•Prepare a budget
Summarize and Analyze
Your Income and Expenses
• It is very helpful to summarize and
analyze your income and expenses
for the previous year.
– That way, you can determine how much
you spent on each type of expense.
Expense Percentages
• You can also compare your past
spending to other peoples’ spending
and you can use the percents to plan
your future spending.
– Cash receipts and payments records can
be used to identify your past income and
expenses.
Tracer Family
Cash Record Summary
What % of income is spent on Food?
9,521.85 / 75,888.10 = .1254722414 = 12.5%
What % of expenses are spent on Food?
9,521.85 / 63,930.69 = .1489402038 = 14.9%
Expense Percentage
Textbook pg 70 A & B
A.) 6,400 / 128,000 = .05 = 5%
B.) 338,200 / 475,000 = .712 = 71%
Budgeting
• Budgets are your future spending
plans.
– They help you allocate your future income
to meet your future needs and save for the
things you want.
• One way to begin a budget is to project
next year’s expenses based on the
percent of income spent in the previous
year.
Budgeting
Textbook pg 71 C & D
C.) 4,500,000 * 5% = $225,000
D.) 5,489 * 2.5% = 137.225 = $137
Review Sec 2.6
• Txbk Pg 72-73 #15-24
– (14 pts)
Quiz Sec 2.6
• Wkbk Pg 23-25 #1-7
–
52 pts.
Chapter 2 Integrated Project
• Wkbk Pg 27-28 #1-5, #14
–
Chapter 2 Review
• Txtbk Pg 74-75 #1-16, 18-25
Chapter 2 Test
• Open Book 100 pts.
• Txtbk page 79-82
– Page 79, # 11-17, 19-20
– Page 80, #1-10
Tax Project
See Ms. Smock (100 pts)
The End 
TAKE TEST
EXTRA TEST PROBLEM –
VANCE MILO HAD AN EARNED INCOME OF
$2,250 LAST YEAR FROM PART-TIME WORK.
Textbook Page
76-77 Task
HE ALSO2.)EARNED
$24.15
IN1-4INTEREST
Use Excel - Can work in pairs
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?
After Test
Textbook Page 76-77 Task 1-4
Use 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 TIP
• A head of household is an unmarried or
legally separated person who pays
more than half the cost of keeping a
home for a dependent father, mother,
or child.
FEDERAL INCOME TAX
(ONE TIME A YEAR)
EARNED INCOME
+ $250
ALLOWABLE DEDUCTION (IF LESS THAN $800 GO
CAN’T BE MORE THAN $4,700)
WITH $800, BUT IT
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
Find federal withholding
Pay 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
2.2 Benefits 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