Transcript How Much Are You Really Making?

How Much Are You Really
Making?
This presentation will help you to
• understand the difference between gross and net pay
• accurately calculate gross pay required deductions and
net pay
Jeanne Dompierre, Michelle Haugan, Leah Lencowski
ECOMP 5007
October 10, 2004
"Certain materials are included under the fair use exemption of the
U.S. Copyright Law and have been prepared according to the
multimedia fair use guidelines and are restricted from further use."
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Materials Needed
•
•
•
•
Pencil
Scratch Paper
Calculator
One CLEAN sheet of
paper that will be
turned into your
teacher at the end of
the presentation
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How Much Money Do You
Actually Take Home When you
Work?
Calculating Gross and Net Pay
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To earn money, you first need to:
GET A JOB
and
AGREE TO A WAGE!
WAGE:
The amount of money you will be paid for working.
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WAGES can be paid:
HOURLY
An agreed upon rate per hour.
OVERTIME – after 40 hours, one and
one-half times the regular pay.
SALARIED
An agreed upon rate, usually not paid
for overtime.
Expected to work a 40-hour standard
work week. More if necessary without
extra pay.
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WAGES can be paid:
HOURLY
• Per Hour – Hourly Rate
SALARIED
• Per Week – Weekly Rate
• Per Month – Monthly Rate
•Bi-Monthly – 2 x per Month
•Bi-weekly – Every 2 weeks
• Per Year – Yearly Rate
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Johnny Gets Paid an Hourly Rate
of $10.00
Johnny earns
10.00
Each hour
he is at
work
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How Much Does Johnny Earn
if he works for 5 hours?
10.00
HOURS
X
HOURLY RATE
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Johnny Earns $50.00
10.00
HOURS
5
X
X
HOURLY RATE
$10.00 = $50.00
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Johnny’s GROSS PAY
is $50.00
GROSS PAY is:
Total money earned for time
worked.
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Stressed-out Susie earns
$5.00 per hour
What is Susie’s Gross Pay if
she works for 7 hours?
I think I know,
Check my Answer
Show me how to determine
Susie’s Gross Pay
Susie’s Gross Pay is:
$35.00
Click Here if your answer
was correct.
Oops, I guess I need help.
Click here.
Susie Earned $35.00
5.00
HOURS
7
X
X
HOURLY RATE
$5.00 = $35.00
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Diligent David earns $8.00 per
hour delivering the mail
What is David’s Gross
Pay if he works
for 46 hours?
I think I know,
Check my Answer
Show me how to determine
David’s Gross Pay
David’s Gross Pay is
$392.00
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
David Earned $392.00
40 HRS
X
8.00 = $320.00
6 HRS.
X
12.00 =
$ 72.00
OVERTIME RATE = REGULAR RATE X 1.5
$8.00 x 1.5 = $12.00
GROSS PAY
$392.00
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What if Diligent David is a salaried
employee and his gross pay is
$30,000 annually.
What is David’s Gross
Pay if he is paid
weekly?
I think I know,
Check my Answer
Show me how to determine
David’s Gross Pay
David’s Weekly Gross Pay is
$576.92
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
David Earned $576.92
weekly
$30,000 ÷ 52 weeks = $576.92
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What if Diligent David is a salaried
employee and his gross pay is
$30,000 annually.
What is David’s Gross
Pay if he is paid
monthly?
I think I know,
Check my Answer
Show me how to determine
David’s Gross Pay
David’s Monthly Gross Pay is
$2500
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
David Earned $2500.00
monthly
$30,000 ÷ 12 months = $2500.00
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What if Diligent David is a salaried
employee and his gross pay is
$30,000 annually.
What is David’s Gross
Pay if he is paid
Bi-monthly?
I think I know,
Check my Answer
Show me how to determine
David’s Gross Pay
David’s Bi-Monthly Gross Pay
is
$1250.00
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
David Earned $1250.00
monthly
$30,000 ÷ 24 (12 months x 2)
= $1250.00
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What if Diligent David is a salaried
employee and his gross pay is
$30,000 annually.
What is David’s Gross
Pay if he is paid
Bi-weekly?
I think I know,
Check my Answer
Show me how to determine
David’s Gross Pay
David’s Bi-Weekly Gross Pay is
$1153.85
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
David Earned $1153.85
monthly
$30,000 ÷ 26 (52 weeks ÷ 2) = $1153.85
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Try calculating gross pay
on your own
Complete Activity One Now
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I thought I could keep my
Gross Pay! Now I know why
it is called GROSS!
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What are two sure things in
life?
Death and Taxes
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Income Taxes – money paid to the
government on any income you receive.
Payroll Taxes –money taken from
employee paychecks and given to
government for income tax. Based on
employee earnings. Paying income taxes
as you earn. (Tax Freedom Day)
Ideal Situation,
The money owed for income taxes
will equal the amount taken out pay for
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payroll taxes.
REQUIRED DEDUCTIONS
Money subtracted
from your gross pay
for taxes by the
government, also
called payroll taxes:
•Federal Taxes
•State Taxes
•FICA (Social Security
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and Medicare)
REQUIRED DEDUCTIONS
FEDERAL TAXES
•The amount subtracted from gross pay for
taxes is determined by the federal
government and you through your
allowances, W4.
•It is a percentage of gross pay based on a
person’s total wages and living situation
(married, single, children, etc.).
•The federal tax deduction is calculated
referring to the appropriate tax table or
by multiplying the government determined
federal tax rate (from tax table) by gross
pay.
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What is a W4?
• Form that employers have you complete
when you start a job, directs them how
much to withhold, take out, of your
paycheck for taxes.
• ALLOWANCE – number that reduces the
amount of money withheld from your pay.
The more allowances you claim, the
smaller the amount withheld.
• You may complete a new W4 anytime.
• LET’S COMPLETE A W4!
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Calculating Federal Tax
Deduction
•Johnny’s Gross Pay is $50.00
•Johnny’s Federal Tax Rate is 20%
•Johnny’s Federal Tax Deduction is $10.00
$50.00 x 20% = $10.00
$50.00 x .20 = $10.00
Gross Pay x Federal Tax Rate = Federal Tax Deduction
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Stressed-out Susie’s
Gross Pay is:
$35.00
How many dollars are subtracted
from her gross pay for federal
taxes if the federal tax rate is
20%?
I think I know,
check my answer
Show me how to determine
Susie’s Federal Tax
Deduction
Susie’s Federal Tax
Taxes are
Deduction is
collected
$7.00
to pay for
public
services
such as
roads,
parks, etc.
That’s a lot of cash
going to Uncle Sam!
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
Susie’s Federal Tax
Deduction is $7.00
$35.00 x 20% = $7.00
$35.00 x .20 = $7.00
Gross Pay x Federal Tax Rate = Federal Tax Deduction
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Diligent David’s Gross
Pay is $48.00
The Federal Tax Rate is
20%
What is David’s Federal
Tax Deduction?
I think I know,
check my answer
Show me how to determine
David’s federal tax deduction
David’s
Federal Tax
Deduction is
$9.60
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
20% or .20 means
20¢ out of every dollar earned,
goes to Uncle Sam.
20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+
20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+
20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+
20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+
20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+
20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢
}
$9.60
There additional deductions to be subtracted
from gross pay, let’s calculate State Taxes and
FICA…
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REQUIRED DEDUCTIONS
STATE TAXES
•The amount subtracted from gross pay for
taxes is determined by the state
government.
•It is a percentage of gross pay based on a
person’s total wages and living situation
(married, single, children, etc.).
•The state tax deduction is calculated by
multiplying the government determined tax
rate by gross pay.
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Calculating State Tax
Deduction
•Johnny’s Gross Pay is $50.00
•Johnny’s State Tax Rate is 15%
•Johnny’s State Tax Deduction is $7.50
$50.00 x 15% = $7.50
$50.00 x .15 = $7.50
Gross Pay x State Tax Rate = State Tax Deduction
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Diligent David’s Gross
Pay is $48.00
The State Tax Rate is
18%
What is David’s State
Tax Deduction?
I think I know,
check my answer
Show me how to determine
David’s state tax deduction
David’s
State Tax
Deduction is
$8.64
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
18% or .18 means
18¢ out of every dollar earned,
goes to Uncle Sam.
$48.00 x 18%
OR
$48.00 x .18
}
$8.64
There is one more deduction to be subtracted
from gross pay, let’s learn about FICA… NEXT
REQUIRED DEDUCTIONS
FICA
•FICA stands for Federal Insurance
Contributions Act. This law was created to
pay for Social Security and Medicare.
•Social Security – Wages paid to
retired people by the government based
on how much they earned during their
working years.
•Medicare – Government sponsored
health insurance for retired people.
•The amount subtracted from gross pay for FICA is always at a rate of
7.65% (6.2% for Social Security and 1.45% for Medicare)
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Calculating FICA
Deduction
•Johnny’s Gross Pay is $50.00
•The FICA Rate is 7.65%
•Johnny’s FICA Deduction is $3.83
$50.00 x 7.65% = $3.83
$50.00 x .0765 = $3.83
Gross Pay x FICA Percentage = FICA Deduction
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Stressed-out Susie’s
Gross Pay is:
$35.00
How many dollars are subtracted
from her gross pay for FICA?
I think I know,
check my answer
Show me how to determine
Susie’s FICA Deduction
Susie’s FICA Deduction
is
$2.68
Someday you
will be old too!
Why should I pay
for old people?
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
Susie’s FICA Deduction
is $2.68
$35.00 x 7.65% = $2.68
$35.00 x .0765 = $2.68
Gross Pay x FICA Percentage = FICA Deduction
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Diligent David’s Gross
Pay is $48.00
What is David’s FICA
Deduction?
I think I know,
check my answer
Show me how to determine
David’s FICA deduction
David’s FICA Deduction is
$3.67
After all these
deductions, is there
any money left for
me?
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
$48.00 x 7.65% = $3.67
$48.00 x .0765 = $3.67
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After all these
deductions, is there
any money left for
me?
NET PAY, the money
left after all
deductions are
subtracted from
gross pay.
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Calculating Net Pay – the money
after deductions, what you
actually bring home…..
•Johnny’s Gross Pay is $50.00
•Johnny’s Federal Tax Deduction is $10.00
•Johnny’s State Tax Deduction is $7.50
•Johnny’s FICA Deduction is $3.83
$50.00 - $10.00 - $7.50 - $3.83 = $28.67
Gross Pay - Federal, State and FICA Deductions = Net Pay
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How much does Stressed-out
Susie actually bring home?
•Her Gross Pay is $35.00
•Her Federal Tax Deduction is $7.00
•Her State Tax Deduction is $4.20
•Her FICA Deduction is $2.68
I think I know,
check my answer
Show me how to determine
Susie’s Net Pay
Susie will
bring home
$21.12
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
$35.00 - $7.00 - $4.20 - $2.68 = $21.12
Gross Pay - Federal, State and FICA Deductions = Net Pay
Susie will bring home
$21.12
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What is Diligent
David’s
Net Pay?
•His Gross Pay is $48.00
•His Federal Tax Deduction is $9.60
•His State Tax Deduction is $8.64
•His FICA Deduction is $3.67
I think I know,
check my answer
Show me how to determine
David’s Net Pay
David’s Net
Pay is $26.09
He will have $26.09
to spend after all
required deductions
have been subtracted
from his gross pay.
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
David’s Net Pay
•David’s Gross Pay is $48.00
• $8.00 x 6 hours = $48.00
•His Federal Tax Deduction is $9.60
•$48.00 x 20% = $9.60
•His State Tax Deduction is $8.64
•$48.00 x 18% = $8.64
•His FICA Deduction is $3.67
•$48.00 x 7.65% = $3.67
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Gross Pay - Federal Tax - State Tax - FICA =
Net Pay
$48.00 - $9.60 - $8.64 - $3.67 = $26.09
David’s Net Pay =
$26.09
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Review
Computer Whiz Carl works at Circuit City.
• Carl worked 12 hours for an hourly
rate of $7.50
•The Federal Tax Rate is 20%
•The State Tax Rate is 10%
• FICA is always 7.65%
What is Carl’s Net Pay?
I think I know,
check my answer
Show me how to determine
Carl’s Net Pay
Carl’s Net Pay is $56.11
Click here is your answer
was correct.
Oops, I guess I need help.
Click here.
Carl’s Net Pay
•Carl’s Gross Pay is $90.00
• $7.5 x 12 hours = $90.00
•His Federal Tax Deduction is $18.00
•$90.00 x 20% = $18.00
•His State Tax Deduction is $9.00
•$90.00 x 10% = $9.00
•His FICA Deduction is $6.89
•$90.00 x 7.65% = $6.89
$90.00 - $18.00 - $9.00 - $6.89 = $56.11
Carl’s Net Pay is $56.11
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OTHER DEDUCTIONS
•
•
•
•
•
Health Insurance
Union Dues
401(K) (often pre-tax)
Others?
PRE-TAX DEDUCTION – deduction is
subtracted from gross pay before
required tax deductions are taken.
(Lowers your income to be taxed, or
taxable income)
FINAL REVIEW
Please show all your work on a piece of paper and hand in
to your teacher when done. Don’t forget your name!
• Angie the Accountant worked 32 hours
for an hourly rate of $18.25
•The Federal Tax Rate is 18%
•The State Tax Rate is 15%
•She also has $4.00 per week taken out
for 401(k) and $2.00/wk for health ins.
How much money does Angie
actually take home? (her net pay)