Transcript Understanding Your Paycheck

7.13.2.G1
Family Economics & Financial Education
Chapter 11
Payroll responsibilities within
the accounting dept.
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
The Payroll Department
• Within the Accounting Department
• Employer has the responsibility to pay each
employee a fair, non-discriminated salary
• www.salary.com to find your worth, according to
zipcode
• Pay will vary according to Cost of Living
– Real Estate prices and Taxes are the major variable
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Payroll Tax evasion
Video: http://www.myfoxphilly.com/dpp/money/Nifty_Fifties_Tax_Troubles_051612
• The five owners and managers of the Nifty Fifty's restaurant chain
have been charged with cheating the IRS out of millions of dollars,
the U.S. Attorney's office announced on Wednesday.
• Robert Mattei, 73, of Delray Beach, Florida; Leo McGlynn, 52, of
Swarthmore, Pa.; Brian Welsh, 48, of Springfield, Pa.; Joseph
Donnelly, 49, of Springfield, Pa.; and Elena Ruiz, 46, of Drexel Hill,
PA were charged in connection with an alleged tax evasion
conspiracy.
• U.S. Attorney Zane Memeger said the five cheated the Internal
Revenue Service by failing to properly account for more than $15
million in gross receipts, thereby evading $2.2 million in federal
employment and personal taxes.
• http://abclocal.go.com/wpvi/story?section=news/local&id=86638
08
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
The Buffet Rule
• Listen:
–
www.whitehouse.gov/photosandvideo/video/2012/03/31/week
ly-address-passing-buffett-ruleso-everyone-pays-their-fair-sh
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Payroll Deductions
• http://www.ehow.com/video_5112528_understa
nding-payroll-deductions.html
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Some Departments within
accounting
1. Auditing
2. Payroll
• Benefits Administration: Medical and Retirement
3.
4.
5.
6.
Financial Reporting
Cost
Tax
AP/AR management
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Accounting transactions
• Salary
– An Expense of doing business
– Gross Pay
• Salary Deductions (optional and required)
– Must be electronically deducted before employee receives paycheck
– Liabilities of doing business
– Transactions:
• All payables are Credited (deducted from the employee’s paycheck)
• Employer “owes” this money to different agencies/companies
• Net Pay – the amount the employee actually takes home after all deductions
are made
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
The Debits and Credits
• Gross Salary Expense
– DEBITED
• All Payables (deductions)
– CREDITED
• Net Pay: Cash
– CREDITED
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
What are Payroll Taxes?
• Taxes – Required charges imposed on US
citizens by local, state, and federal
governments
• Used to provide public goods and services
– Largest amount of taxes a person pays is on
his/her income
What are some services in your community that
are funded by tax dollars?
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Facts
• On average, approximately 40% of a person’s
paycheck will be deducted due to taxes, benefits,
and investment choices before they even receive a
paycheck
• Taxes- Required charges imposed on citizens by
local, state, and federal governments
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Taxes
Provide public goods and services
What is an item or service that you use
every day that is paid for by taxes?
• Citizens pay many different types of taxes in
many different ways
– Income tax, sales tax, property tax
• Largest amount of taxes is paid on income
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
REQUIRED TAX DEDUCTIONS
1.
Federal Income Tax
1.
2.
2.
3.
4.
State Income tax – flat rate based on state
Local Income tax – flat rate based on township
FICA (Social Security Tax) – 4.2%
1.
5.
For those retired after age 62.5 or legally disabled to work
Unemployment tax - .08%
1.
6.
Based on how much you make
US gov’t has 6 brackets
Goes to those in your state that are unemployed
Medicare – 1.45%
1.
Goes to those in our country who are uninsured, underinsured, or those
retired that are eligible for gov’t aide
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Federal Income Tax
Brackets
1.
2.
3.
4.
5.
6.
10% - $0 to $8,375
15% - $8,375 to $34,000
25% - $34,000 to $83,600
28% - $83,600 to $174,400
33% - $171,850 to $373,650
35% - $373,650 and up
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Taxes continued
• Internal Revenue Service (IRS) – Collects federal
taxes, issues regulations, and enforces tax laws
written by the United States Congress for
individuals and private businesses
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
OPTIONAL PAYROLL
DEDUCTIONS
1.
2.
Medical Benefits – health insurance
1. Employer responsibility to have a relationship with 1 or more health insurance
companies
2. Offer benefits to your employees
3. Employer pays a %; the employee pays a % (premium)
4. More the employer pays, the greater expense BUT it could make the employer
more desirable/loyalty
Retirement Planning –
1.
Employer offers an investment firm to withdraw a % of paycheck
and invest in the stock market or other investment tool
1.
2.
•
401K (mutual funds or groups of stocks)
IRA (retirement account, with interest)
Money is UNTOUCHABLE until age 62.5 (penalty is 20% for
early/partial withdrawal)
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Largest Investment firms THAT
Employers work with
• Vanguard and Fidelity
• Employee meets with a Financial Advisor to discuss investment
strategy and retirement goals at time of Hiring
• Here is the Discussion:
– How much should I invested each week from my Gross Pay?
– What stocks/investments/401ks should I invest in?
– What is my RISK tolerance?
– How long do I plan to work for?
– What age would I like to retire at?
– How much $ do I want waiting for me when I retire so I live
comfortably?
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
How are Taxes Paid?
1. By Workers
•
Through deductions made from your Gross Salary by
your Employer – Income Taxes
2. By homeowners – Real Estate and School Taxes
3. By shoppers – Sales Tax
4. By businesses – their profit is taxed
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Real Estate taxes
• These taxes are separate and not deducted from
one’s paycheck
• This is owed once a year by homeowners – check
sent to Local Government
• Broken into 2:
– Property – based on value of home
– School – based on needs of school
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Starting a New Job
1.
2.
• Fill out employment
forms
• Form W-4 and Form I-9
• Choose how to receive
the paycheck (if options
are available)
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Form W-4
Employee’s Withholding Allowance Certificate
– Determines the percentage of gross pay which will be
withheld for taxes
• Allowances
– Used to determine the amount of federal taxes withheld
from the paycheck
– Dependents lower your taxes!
• Dependent – a person who relies on the taxpayer for financial
support
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Form I-9
Employment Eligibility Verification Form
• Used to verify the eligibility of individuals to avoid
hiring undocumented workers or others who are
not eligible to work in the United States
• Must provide documentation which establishes
identity and employment eligibility
– Examples include driver’s license, passport, Social
Security card, and birth certificate
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Form I-9
Employment Eligibility Verification Form
Verifies the eligibility of individuals to avoid hiring
undocumented workers or others who are not eligible
to work in the United States
Must provide documentation
which establishes identity and
employment eligibility
Driver’s
License
Passport
Social
Security card
Birth
Certificate
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Methods for paying
employees
1.Live Check
2.Direct Deposit
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Family Economics & Financial Education
Reading a Paycheck
Why is it important to read
your paycheck stub?
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Paycheck Stub
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Paycheck Stub
– A document included each pay period which
outlines paycheck deductions
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Personal Information
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Personal Information
– States the employee’s full name, address, and social security number
– Always check to ensure this information is correct
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Pay Period
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Pay Period
– The length of time for which an employee’s wages are calculated; most are weekly, biweekly, twice a month, or monthly
– The last day of the pay period is not always payday to allow a business to accurately
compute wages
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Gross Pay
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Gross Pay
– The total amount of money earned during a pay period before deductions
• This is calculated by multiplying the number of hours worked by the hourly rate
• If a person is on salary, it is the total salary amount divided by the specified time
period
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Net Pay
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Net Pay
– The amount of money left after all deductions have been
withheld from the gross pay earned in the pay period
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Deductions
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Deductions
– The amount of money subtracted from the gross pay earned for mandatory
systematic taxes, employee sponsored medical benefits, and/or retirement
benefits
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Year-to-Date
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2009-7/11/2009
Year-to-Date
• Total of all of the deductions which have been withheld from an individual’s
paycheck from January 1 to the last day of the pay period indicated on the
paycheck stub
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Conclusion
• Review the following concepts:
– Form W-4
– Form I-9
– Reading a paycheck definitions
• Net vs. gross pay
• Required and Optional deductions
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.13.2.G1
Activity
• Calculating Payroll
• Using Excel to calculate payroll and make
deductions
– Chapter 11 on website
© Family Economics & Financial Education –Revised August 2009– The Essentials to Take Charge of Your Finances – Paychecks Advanced
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona