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Bellringer

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.

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Bellringer

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  1. Bellringer What is gross pay?

  2. Chapter 2 Net Pay

  3. 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

  4. Txtbk Pg 42 A & B A.) Single, $458 wages, 1 withholding allowance claimed. B.) Married, $514 wages, 2 withholding allowances claimed. $52 $42

  5. 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

  6. Txtbk Pg 43 C & D C.) FICA tax for an income of $24,000. D.) FICA tax for an income of $89,000. $24,000 x 7.65% = $1,836 $89,000 x 7.65% = $6,275.30

  7. Txtbk Pg 43 E, F, G, & H E.) FICA tax for weekly wage of $460. F.) FICA tax for weekly wage of $712.44 G.) FICA tax for weekly wage of $1,087.30 H.) FICA tax for weekly wage of $375.88 $460 x 7.65% = $35.19 $712.44 x 7.65% = $54.50 $1,087.30 x 7.65% = $83.18 $375.88 x 7.65% = $28.75

  8. GROSS PAY- DEDUCTIONS( FICA, WITHHOLDING TAX, & OTHER)= NET PAY

  9. 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

  10. 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

  11. Review Section 2.1 Textbook Page 45 Problems 15 - 37

  12. Quiz Section 2.1 Workbook Page 13-14 Problems 1-4

  13. 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

  14. Section 2.2BENEFITS AND JOB EXPENSES WAGES + FRINGE BENEFITS (aka Employee Benefits) TOTAL JOB BENEFITS - EXPENSES NET JOB BENEFITS

  15. 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 2.) Find the Total Job Benefits 2580 + 3133 + 2545 = $8,258 $31,807 + $8,258 = $40,065

  16. 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 2.) Find the Total Job Benefits 28,089 x 33% = $9,269.37 $28,089 + $9,269.37 = $37,358.37

  17. Section 2.2BENEFITS AND JOB EXPENSES WAGES + FRINGE BENEFITS (aka Employee Benefits) TOTAL JOB BENEFITS - EXPENSES NET JOB BENEFITS

  18. 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 theNet Job Benefits $329 + $278 + $475 + $1,077 = $2,159 56,102 - 2,159 = $53,943

  19. 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 theNet Job Benefits $580 + $1793 + $2057 = $4,430 78,299 - 4,430 = $73,869

  20. Sec 2.2 Benefits & Job Expenses Take the Possible Job Txtbk Pg 50 E & F E.) Current JobPossible 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

  21. Sec 2.2 Benefits & Job Expenses Amy keep your job! Txtbk Pg 50 E & F F.) Current JobPossible Job Sal. $49,500 $45,200 Ben. 29% 34% Exp650+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

  22. Review Section 2.2 Textbook Page 51 Problems 15 – 19 (5pts.), 21 (show work - 5 pts.) (10 pts)

  23. Quiz Section 2.2 Workbook Page 15-16 Problems 1-6 (44 pts)

  24. Bellringer • What are total benefits? • What are total job benefits? • What are expenses? • What are net job benefits?

  25. 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.

  26. BUSINESS TIP Self-employed people must estimate their income taxes for the year. They then pay part of that estimated tax each quarter.

  27. 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.

  28. 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

  29. 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

  30. 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

  31. 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

  32. 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.

  33. Sec 2.3 – CALCULATE FEDERAL INCOME TAX (ONE TIME A YEAR) Calculate your itemized deductions. Standard Deduction: Single - $4,700 Marrried filing Jointly - $7,800 Itemized Deductions can be: • Interest paid on home mortgages • Property Taxes • State & Local Income Taxes • Medical & Dental Expenses • Contributions to Charities • Casualty & Theft Loss If Standardized < Itemized use the Itemized amount If Standardized > Itemized use the Standardized amount.

  34. 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.

  35. 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 self-employment 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.

  36. 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.

  37. 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

  38. 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 $65,000 Deductions - $ 4,700 $60,300 Exemptions - $ 3,000 Taxable Income $57,300

  39. 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 $50,000 Deductions - $ 8,500 $41,500 Exemptions - $ 9,000 Taxable Income $32,500

  40. 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

  41. 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

  42. 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

  43. Review Sec 2.3 • Wkbk Pg 17 #1-10 • (21 pts)

  44. Quiz Sec 2.3 • Txtbk Pg 58 #11-28 • (36 pts)

  45. Section 2.4State 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

  46. Sec. 2.4STATE & CITY INCOME TAXES 2 TYPES – GRADUATED FLAT **MOSTLY BOTH TYPES USE FEDERAL TAXABLE INCOME

  47. 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.

  48. 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

  49. 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

  50. Sample Graduated Tax Rate Schedule

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