Income Taxes for Individuals Calculated as a percent of your taxable income Taxable Income = Gross Pay - Pre-Tax Deductions (examples: retirement plan.

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Presentation transcript:

Income Taxes for Individuals Calculated as a percent of your taxable income Taxable Income = Gross Pay - Pre-Tax Deductions (examples: retirement plan contributions, qualifying insurance premiums) Net Pay = Gross Pay - __________________ (examples: Federal Income Tax, Social Security and Medicare, State Income Tax, and Local Income Tax ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes 1 1

Social Security & Medicare Contributions (FICA: Federal Insurance Contribution Act) Calculated as a percent of your total earned income. Social Security is a paycheck for the elderly = _____% Medicare is insurance for the elderly = _____% Will you get Social Security? Take the life expectancy test at ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes 2 2

What is a pay stub? Why is it important to review your pay stub? Pay stub - outlines the deductions made to ___________

Financial Decisions When Starting a Job Pay – Will your earnings fit into your_________plan? Paycheck – Do you want to automatically deposit your __________ to savings or receive it in person? Employee Benefits – Which ________ plan best fits your situation? – How much will you contribute to a retirement or insurance savings program? – Do you have the automatic payroll deduction option for any of your regular expenses? Withholding Allowance – How much __________ _________is withheld from each paycheck? ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes 4 4

W-4 Withholding Certificate ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes W4 Form You fill this out ______________you start working.

W-2 Withholding Certificate ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes 6 6 You receive this after the end of the year (before February 1) to show how much you paid in ______________.

1040 EZ Tax Form ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes EZ You need to download before typing in the form. After you receive your _______, you fill this out to see if you ________taxes or if you will receive a __________. If you can be claimed as a dependent, you must file a tax return if you made __________. If you are single and can’t be claimed as a dependent, you must fill this out if you made ________________.

What is Your Net Pay? Given: Receive an annual salary of $30,000 Paid twice a month (24 payments a year) Deduct income taxes ($4,500) and union dues ($600) What is your gross pay per paycheck? What is your net pay per paycheck? ©2012 National Endowment for Financial Education | Lesson 3-3: Pay and Taxes 8 8