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Paychecks and Taxes

Paychecks and Taxes. Chapter 23 Mrs. Sorrell. Payday. Pay period The length of time for which an employee’s wages are calculated. Usually weekly, biweekly, semimonthly, or monthly pay periods.

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Paychecks and Taxes

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  1. Paychecks and Taxes Chapter 23 Mrs. Sorrell

  2. Payday • Pay period • The length of time for which an employee’s wages are calculated. Usually weekly, biweekly, semimonthly, or monthly pay periods. • Many companies delay pay for a week or a full pay period. The delay allows the company to accurately pay employees for all the time they worked during the pay period.

  3. Paychecks • Most companies pay by check to have a permanent record of their expenses. • Most paychecks have a stub attached to it. • Gross pay: the total amount of money earned during a pay period • Net pay: the amount of money left after all deductions have been taken from the gross pay

  4. Deductions • Federal income taxes • State income taxes • Social security taxes • Medicare taxes • Health insurance contributions • Union dues • Saving plans • Pensions • Uniforms • Loans • Charity contributions

  5. Paperwork • W-4 Form • Required each time you start with a new employer • The form is called Employee’s Withholding Allowance Certificate • The numbers you put on here determines how much of your pay should be withheld for taxes • Dependent • A person, such as a child or nonworking adult, who relies on a taxpayer for financial support

  6. IRS aka Internal Revenue Service • W-2 form is the method employers use to report your income and taxes to you and the IRS • W-2 is called the Wage and Tax Statement • W-2 shows how much a worker was paid and how much income was withheld for taxes in a given year • IRS—the agency that enforces federal tax laws and collects taxes • Income tax—tax on all form of earnings • FICA—Federal Insurance Contributions Act, allows the federal government to reserve a percentage of a paycheck for social security tax

  7. Filing a Federal Tax Return • April 15 is the usual filing deadline • IRS does not send out tax return forms in the mail anymore • The simplest form is the 1040EZ • You may complete your own tax return • Irs.gov has all rules and forms listed on the website • Line 1 is W-2 income • Line 2 is interest income • There are penalties for filing late (past April 15) • Audits are not necessarily cause for panic

  8. Tax exempt states • Alaska • South Dakota • Nevada • Texas • Florida • Washington • Wyoming • Limited income tax • Tennessee • New Hampshire

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