Chapter 8 Income and Taxes Objectives: Types of income Regulations affecting pay Examples of benefits Employment classifications and effect on pay

males vs. females earnings

males vs. females earnings

8.1 Types of Pay Salary: ex: $45,000 a year Wages: ex: $10/hour Piecework: ex: $12.00 per basket Commission ex: 10% of sales some earn 100% commission, sometime base pay + ___% commission.

8.1 Types of Pay Salary: ex: $45,000 a year Wages: ex: $10/hour Ex:Management positions, skilled workers Wages: ex: $10/hour ex:hourly workers, may be lower skilled Piecework: ex: $12.00 per basket Ex: artists Commission ex: 10% of sales some earn 100% commission, sometime base pay + ___% commission.

8.1 Define Types of Pay Pros: Cons: Salary: consistent pay long hours may qualify for overtime pay Wages: over time pay fewer hours less pay Piecework: incentive to produce low performance, low/no pay Commission:performance incentive low performance, low/no pay

Which is better? $15.00 per hour or $30,000/ year? Calculate.

Answer: $15.00 x 40 hrs per week= $600/week $600/week x 52 weeks = $31,200 $15.00/hour = $31,200 vs. $30,000

Tips and Bonuses Do you pay taxes on tips and bonuses?

Tips and Bonuses Do you pay taxes on tips and bonuses? Yes. IL: Tipped employees earn $4.95 per hour (employers may claim credit for tips, up to 40% of wage[21]). http://www.dol.gov/whd/state/tipped.htm#Illinois

Fair Labor Standards Act Same work, same pay. Prevent discrimination Fair hourly wages Minimum wage IL $8.25 Sub-minimum wage: under 20, dev. Disabled, or full time students. IL Employers may pay anyone under the age of 18 fifty cents less.

Overtime Over 40 hours/week 1.5 x hourly rate Salary employees excluded. Calculate gross pay for 43 hour week $9.50/hr

New Overtime ruling effective 12/16 http://www.nbcnews.com/business/careers/u-s-extends-overtime-pay-4-2-million-salaried-workers-n576031

Other benefits that may be offered through employer: “Fringe Benefits” Health, dental, vision insurance plans Savings/retirement plans Paid holidays Sick leave, bereavement Pay for additional education Discounts Ex: Wesclin teachers 13 sick days/year 3 personal days

American Paid Vacation Time & Sick Time: There is not a federal law requiring paid sick days in the United States. The U.S. remains the only industrialized country in the world that has no legally mandated annual leave. In every country included except Canada and Japan (and the U.S., which averages 13 days/per year), workers get at least 20 paid vacation days. In France and Finland, they get 30 – an entire month off, paid, every year. http://20somethingfinance.com/american-hours-worked-productivity-vacation/

US has NO required Paid Maternity/Family Leave:

Employment classifications Full-time: 35+ hours/week Qualify for other company benefits. Part-time: under 35 hrs/wk. Most do not qualify for benefits. Temps: Short term assignments. No benefits. Hired through temp agency, cheaper for employers. Contract: Hired for specific period to complete project. No company benefits.

8.2 Understanding paychecks How would you like to get paid? Weekly Bi-weekly (2 weeks) Monthly Direct Deposit- check goes directly into your specified bank account. *receive money faster. No trip to bank.

What’s on a paystub? Employee identification (Social Security #) Pay period Earnings: hours x rate of pay YTD= year to date T/P= this pay period

Where does all my money go?? Gross Pay: total amount of money earned. Net Pay: (“take home pay”) Amount of pay AFTER taxes and other deductions are taken out.

Look at your paystubs… How did your Net Pay compare to your Gross Pay Look at your paystubs… How did your Net Pay compare to your Gross Pay? Record answers on paystub: 1) What percentage of your paycheck did you actually get to keep? Divide net by gross amount = ____% Did anyone pick a state with no state tax? 2) Estimate about how long are you working in order to just pay your tax deductions??

What else may be deducted from your paycheck? Health Insurance Life insurance Dental insurance Vision insurance Retirement plans i.e. 401K, pensions Medical savings accounts

Who is “FICA”?! Social Security (FICA): Pays retirement, survivors, disability benefits. Medicare (FICA): Helps pay medical expenses for those that qualify- “Federal Insurance Contributions Act”

Other Taxes: Federal & State Taxes: Help pay for schools, roads, Parks, Law enforcement, etc.

Should you pay higher tax rates if you make more $? http://taxfoundation.org/article/2014-tax-brackets What tax bracket would you be in as a single person?

Is being “Paid under the Table” a good idea?

Concerns of “Paid under the table” not offering you any of the benefits to which you might be entitled, you’re probably not covered for purposes of worker’s compensation or unemployment. You’re definitely not paying in to Social Security. No Proof of income- Can’t gets loans, credit.

What President started income taxes? Why?

What President started income taxes? Why? To help fund the Civil War, 1863.

Ruled Income Tax Unconstitutional 1913 Woodrow Wilson’s term, 16th Amendment allowed Gov’t to collect income taxes. 1930’s FDR increased taxes to help pay for SOCIAL SECURITY.

references http://en.wikipedia.org/wiki/List_of_U.S._minimum_wages