TAXES AND YOUR PAYCHECK Consumer Economics. Your First Paycheck!  You nailed the interview, got a call back and started your new job!  You’ve been working.

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Presentation transcript:

TAXES AND YOUR PAYCHECK Consumer Economics

Your First Paycheck!  You nailed the interview, got a call back and started your new job!  You’ve been working hard for a couple of weeks, having a blast, but now you’re ready to get PAID!!!  You worked 80 hours over 2 weeks for $25/hour.  Payday comes around and your check is….  $2000…………………..  SIKE!

What Happened?!?!?!  Your paycheck was less than expected. Was there an error?  Probably not.  A variety of taxes and other expenses are taken out of each paycheck.

Sample Pay Stub

What gets taken out?  Income Taxes  Federal and State  This is how the governments run and provide services  Social Security/ Pension  Will be paid back when you retire  Medicare  Will cover health expenses when retired  Health/Dental Insurance  Covers current health care expenses  Union Dues  Membership fees if you are in a union  Retirement Plan/ Savings (401K, Roth IRA, 403B)  Optional, but a good idea

What gets taken out?

About Taxes  Individuals and businesses pay taxes to the government.  This money is used to help the govt. operate and provide services.  Taxes are collected by all levels of government (Federal, State, Local).  Different types of taxes include: income, sales, property, excise, “sin,” estate, gift, and business taxes.

“Sin” Taxes

Federal Government Spending  1. Social Security and Medicare  2. Social Programs (Medicaid, food stamps, unemployment, social services)  3. National Defense, Veterans and Foreign Affairs  4. Physical, Human, and Community Development (agriculture, education, job training, science, infrastructure)  5. Interest on National Debt  6. Law Enforcement and General Government

State and Local Government Spending  Building and maintaining roads  Police and Fire depts.  Criminal Justice system  Building/operating schools  State universities  Supporting medical facilities

Taxes pay for this

And this….

Your Tax Return  Every year, Federal and State governments take out taxes as the year goes on.  They either take too little, in which case you owe the government $  Or they take too much, and they owe you a tax refund!  Either way, you need to fill out a Tax Return form and mail it to the IRS.

Sample W-2 Form

1040EZ Form

W-2 #1

W-2 #2