SECTION 2-6 pp. 128-132 Statement of Earnings

Section Objective Figure out: Net pay per pay period

Key Words to Know net pay (p. 128) The amount you have left over after all tax withholdings and personal deductions have been subtracted from your paycheck.

Formula Net Pay = Gross Pay – Total Deductions

Jack’s Jackpot p. 128 Describe your philosophy on money.

Example 1 Alysha Moore’s gross weekly salary is $600. She is married and claims 3 allowances. The Social Security tax is 6.2 percent. The Medicare tax is 1.45 percent. The state tax is 1.5 percent. Each week she pays $12.40 for medical insurance and $2.50 for charity. Is Moore’s earnings statement correct?

Figure 2.4

Example 1 Answer: Step 1 a. Federal withholding $27.00 Find the total deductions. a. Federal withholding $27.00 b. Social Security: 6.2% of $600.00 37.20 c. Medicare: 1.45% of $600.00 8.70 d. State tax: 1.5% of $600.00 9.00 e. Medical insurance 12.40 f. Charity 2.50 Total $96.80

Example 1 Answer: Step 2 Find the net pay. Gross Pay – Total Deductions $600.00 – $104.80 = $503.20 Her statement is correct.

Practice 1 Find the deductions and the net pay. Social Security is 6.2 percent of the first $90,000. Medicare is 1.45 percent of all income. Use the tax tables on pages 788-791 in your textbook for federal tax. Round to the nearest cent.

Practice 1 (cont.) Pierre Lamont is married and claims 4 allowances. His gross weekly salary is $628. Each week he pays federal, Social Security, and Medicare taxes, as well as $28 for medical insurance and $12 for union dues. What are his deductions and his net pay?

Practice 1 Answer Federal: $23 Social Security: $38.94 Medicare: $9.11 Net pay: $516.95

Practice 2 Find the deductions and the net pay. Social Security is 6.2 percent of the first $90,000. Medicare is 1.45 percent of all income. Use the tax tables on pages 788-791 in your textbook for federal tax. Round to the nearest cent.

Practice 2 (cont.) Michele Sawyer is single and claims 1 allowance. She earns $11.50 per hour as a pest controller and works 40 hours per week. Deductions include federal income tax, Social Security, and Medicare.

Practice 2 (cont.) State taxes are 4 percent of gross income, and local taxes are 2 percent of gross income. She pays $42.75 per week for medical insurance. What are her deductions and net pay for the week?

Practice 2 Answer Federal: $46 Social Security: $28.52 Medicare: $6.67 State tax: $18.40 Local tax: $9.20 Medical insurance: $42.75 Net pay: $308.46

END OF SECTION 2-6 Statement of Earnings