Understanding Your Paycheck Economics Ms. McRoy

“Aim” What is on my paycheck?

“Do-Now” Imagine that you’ve been working as a lifeguard this semester for the NYC Dept. of Parks and Recreation. You just received a check for the last two weeks you worked. What’s the first thing you would do? Why?

Types of Income What is it? What types are there? The money people receive in exchange for their work. What types are there? Salaries: an annual amount paid on a monthly, semi-monthly, or bi-weekly basis. (e.g. Banking Analyst: base salary $75,000 per year) Wages: calculated by multiplying the hours worked by an hourly pay rate. (e.g. Doug worked 40 hours last week at a rate of $15/hour)

How do you get your money? Paycheck An actual check provided to the employee by the employer. Direct Deposit When your employer directly transfers the money into your checking or savings account. Payroll Card A pre-paid card that is given to employees.

Getting a Paycheck Advantages: Disadvantages: Employee gets a physical check. Employee gets to decide what to do with it, right away. Disadvantages: Employee is responsible for the check, but the check may get lost. It costs more money for companies to print paychecks than to use direct deposit.

Using Direct Deposit Advantages: Disadvantages: Employer has lower processing costs. Employer (not the employee) deposits the check.  Less risk for the employee! Employee can still see his/her paystub to see deductions taken. Disadvantages: Employee needs to have a depository institution (aka bank) where the money can go.

Using a Payroll Card Advantages: Disadvantages: Employers have lower processing costs It’s safer than carrying cash (need a P.I.N.) Employees are able to make online purchases Disadvantages: Potential fees. (e.g. annual fee, ATM fee, inactivity fee, replacement fee, etc)

Reading a Paycheck

What determines the amount of taxes you pay? Form W-4 (Federal) & IT2014 (NY State (Employee’s Withholding Allowance) You must complete one for every new job. Your allowances (aka exemptions) depend on: head of household the number of dependents whether you have a second job your marital status and filing status any additional amount the you may want to withhold The more allowances (aka exemptions) you have, the fewer the taxes you have taken out each paycheck

What determines the amount of taxes you pay?

Reading a Paycheck

Additional Deductions Medical Insurance - Voluntary Dental Insurance - Voluntary Vision Service Plan (VSP) - Voluntary Life Insurance – Voluntary 401(k)/403 (b) – Voluntary Pension – Voluntary/Involuntary Garnishments – Involuntary E.g. Defaulted student loans, child support, alimony, and/or unpaid taxes.

Form W-2 At the beginning of the next calendar year, you will get a Form W-2. It’s a summary of a person's actual earnings and tax withholdings for an entire year.

Sample W-2 Real World Business Chicago, IL 60640 Irma Money 2301 South Jackson 000-00-000 16,680.24 1034.16 1,728.00 241.92 IL 12-2222222 440.40 D 2000.00 When you file your Form 1040 next year, you will include your W-2’s as proof of taxes withheld. What will happen if you had too much federal/state income tax withheld? Too little?

Filing Tax Returns Federal NY State

What needs to be reported? To be safe, report everything. E.g. wages, tips, salary, rental income, interest, dividends, lottery winnings, gambling winnings, etc.

“Aim” What is on my paycheck?