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Income and Taxes

Income and Taxes. Lawns R Us @2008 Oklahoma State Department of Education. Objectives. Identify the different kinds of payroll deductions. Explain the difference between gross and net income. Find the net income. Income.

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Income and Taxes

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  1. Income and Taxes Lawns R Us @2008 Oklahoma State Department of Education.

  2. Objectives • Identify the different kinds of payroll deductions. • Explain the difference between gross and net income. • Find the net income.

  3. Income • Gross Income: wages or salary before deductions for taxes and other purposes. • Net Income: commonly called “take home pay”; it is your income after all deductions and exemptions.

  4. Paycheck Deductions • Deduction: anything that is subtracted from the gross amount. Can either be voluntary or required. • Taxes: state and federal (required) • Insurance: health, life, or dental • Stock purchases • Meals or uniforms • Retirement • Other ideas?

  5. Paycheck Exemptions • Exemption: Legal allowances that reduce the amount of income taxes subtracted from your gross income. • You fill out a form when you are hired. You can have federal withholding allowances for yourself, your spouse, and your dependents.

  6. Payroll Taxes • FICA (another name for Social Security) stands for Federal Insurance Contributions Act that covers both Social Security and Medicare. • Federal programs providing benefits for people who are retired, disabled, or children or deceased workers. • Any business with more than 1 employee must pay FICA (employer pays ½ and employee pays ½.)

  7. State & Federal Taxes • Actual amount of income tax taken out each month depends on a person’s income. Employers use information called “tax tables.” • State payroll taxes vary greatly from state to state, but federal tax rates are the same for everyone living in the United States.

  8. Why Taxes? • Paying taxes is a part of the responsibility of earning an incomes. • Taxes are used to support a variety of programs, such as schools, national defense, and public welfare. • We all enjoy the benefits from taxes.

  9. Complete Wksht 1.2 and Activity 1.2.1 • Answer all of the questions on the worksheet!

  10. Answers to Lesson 1.2 • 1. The difference between gross and net income is gross income is salary before deductions and net income is your income after all deductions and exemptions.

  11. Answers to Lesson 1.2 • 2. Some of the different kinds of deductions that an employer may deduct are: • State Taxes (required) • Federal Taxes (required) • FICA (required) • Retirement (optional) • Uniforms, meals, stock purchases (optional) • What else?

  12. Answers to Lesson 1.2 • 3. What is net pay? • A. The amount of money left after all deductions have been taken. • 4. What 2 taxes are included within the Federal Insurance Contribution Act (FICA)? • B. Social Security & Medicare.

  13. Paycheck Deductions – Activity 1.2.1 • 1. The employer is Lawns R Us. • 2. Zooma earned $294 before deductions. • 3. Zooma’s hourly wage is $240/40hours, is $6 an hour. • 4. Zooma’s deductions are: income tax, state tax, FICA, and meals.

  14. Paycheck Deductions – Activity 1.2.1 • 5. Divide Zooma’s net pay by her gross is pay $223.43/$294.00 = .76, which is 76%. • 6. To find the percent divide the tax by her gross pay • Federal Tax: $42.65/$294.00 = .145, which is 14.5%. • State Tax: $8.67/$294.00 = .0295, which is 2.95%. • FICA: $16.25/$294.00 = .055, which is 5.53%

  15. Paycheck Deductions – Activity 1.2.1 • 7. The pay period is between 8-6 to 8-12. • 8. $372.01 is the income tax that has been taken out of Jennifer’s paycheck so far this year. • 9. Jennifer contributed $5 to a retirement plan this paycheck. • 10. Jennifer’s take-home pay was $296.26.

  16. Paycheck Deductions – Activity 1.2.1 • 11. To find the percent of Jennifer’s take-home pay divide her net pay by her gross pay, $296.26/$374.00, which is .792 or 79.2%. • 12. To find the percent divide the tax by her gross pay • Federal Tax: $30.75/$374.00 = .0822, which is 8.22%. • State Tax: $9.50/$374.00 = .0254, which is 2.54%. • FICA: $22.49/$374.00 = .0601, which is 6.01%

  17. Summary • You should now know • The difference between net and gross pay • The difference between deductions and exemptions • The different types of payroll deductions • How to find the percent of net pay • How to find the percent of federal tax, state tax, and FICA.

  18. Resources • Entire Lesson plan: • http://sde.state.ok.us/curriculum/PFLP/Student/Standard_1/module_1.2.pdf • Basic information on Payroll taxes: • http://taxes.about.com/od/payroll/qt/payroll_basics.htm • Internal Revenue Service • http://www.irs.gov/

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