Income and Taxes

 Salary – set amount of money earned by an employee per year or other fixed length of time  A portion of the salary is paid at regular intervals  Each paycheck represents the salary divided by the number of pay periods  How much would each paycheck be? $60,000 paid monthly = $26,000 paid biweekly = $30,000 paid on 1 st & 15 th =

 Wages – employee earnings that are paid by the hour, day, or item  Piecework – work for which wages are based on the number of items or pieces produced  How much would each paycheck be? $7.50 per hour/ 40 hours $16.00 per hour/ 80 hours 1000 $.25/piece

 Commission – fixed percentage or amount of profit given to an employee for making a sale  Some earn an hourly wage also What are some jobs that are paid by commission?  How much would each paycheck be? $15,000 in sales/ 10% Commission = 40 $5.00/hour + $20,000 sales/ 5% commission =

 Tips – money given to an employee by customers in exchange for a service  Most workers earn a small hourly wage List some jobs that work for tips. Bonus – sum of money paid to an employee in addition to regular pay  Christmas  Reach safety goal  Reach sales goal

 Equal Pay  The Fair Labor Standards Act includes equal pay provisions that forbid employers for paying one person less than another person for the same work.

 Minimum wage – lowest hourly rate an employer may legally pay most workers  Raised periodically ($7.25)  Subminimum wage – set lower that the standard wage  Full-time students  Employees younger than 20  Employees who are developmentally disabled

 Insurance  Savings and Retirement  Usually pre-tax  Match program  Paid holidays  Paid vacations  Sick leave  Additional Education

 Full-time – hold wage or salary positions of at least 35 hours per week, take part in employer sponsored benefit programs, tend to earn higher wages that employees working in other classifications  Part-time – employees who work less than 35 hours per week, may or may not be eligible for benefits

 Temporary – fill temporary vacancies or to help with additional work, do not receive benefits  Contract – hired for a specified period of time to complete a particular job

 You are trying to decide between two summer jobs. One pays $2 an hour above minimum wage and guarantees at least 25 hours per week, with up to 40 hours possible in busy periods. The other job pays $2 less than minimum wage. However, you’ll receive tips and can work as many or as few hours as you wish. Explain how you would compare the income potential of the two jobs? What else would you take into consideration and why?

 Weekly  Every two weeks  Once a month  Twice a month  Direct deposit – pay is electronically transferred directly into the recipient’s bank account

 Identification  Name, address, pay period, employee id  Earnings  Number of hours worked, Pay rate, Year to date  Gross pay – total amount of money earned during pay period  Deductions – anything that is subtracted from gross pay  Taxes ▪ Federal Withholding ▪ Social Security ▪ Medicare  Benefits ▪ Insurance (health, life) ▪ Retirement  Net pay – amount of pay after taxes and deductions

Taxes Deductions April 15 Form W- 4 Exemptions Returns

 Income tax is the largest source of money used by the federal government to provide services to its citizens  How do you fulfill your responsibility to pay income taxes?  Complete a form that allows your employer to withhold income taxes for your pay. (W-4)  File a tax return at least once a year and pay any additional taxes owed.

 Your employer will withhold, or take out, income taxes for every paycheck and send to the government.  Form W-4 Form W-4  Personal Information  Exempt status  Allowances

 Personal Information  Name  Address  Social Security number  Marital Status  Exempt Status  Expect to earn to little income  Didn’t have to pay taxes the previous year  Allowances – factors that affect the amount of income tax withholding  The more allowances you claim, the less tax your employer will take out  You should not claim more allowances than allowed, but you may claim less

 File a tax return  Actual earnings  Calculate tax owed  Compare to tax withheld ▪ Pay difference ▪ Refund  Internal Revenue Service (IRS)  April 15  What do you need?  Form W-2 Form W-2 ▪ Wage and Tax Statement ▪ Sent by January 31  Form 1099 Form 1099  IRS instruction booklet and forms IRS instruction booklet ▪ Post Office ▪ Library ▪ Online  Personal Records

 Filing status  Exemptions  Dependent – someone who is supported by a tax payer’s income  Income  Deductions  Tax deduction – reduces the amount of income that is taxed  Itemized deductions – amount actually spent on tax-deductible expenses  Standard deduction – set amount the IRS allows you to deduct without listing actual expenses  Taxable income  Tax Owed  Tax Credits – subtracted directly from the amount of tax owed  Final calculations

 Form Form