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

Wage gap after college  / wage-gap-starts-right-after- college-research-shows?lite / wage-gap-starts-right-after- college-research-shows?lite / wage-gap-starts-right-after- college-research-shows?lite  What was average salary for college graduates one year out of school for women vs. men in 2009?

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 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 no 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]). ate/tipped.htm#Illinois [21] ate/tipped.htm#Illinois[21] ate/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

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

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. 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? 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 $?  eral-income-irs-tax-brackets.html eral-income-irs-tax-brackets.html eral-income-irs-tax-brackets.html  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?

 To help fund the Civil War, 1863.

1895 Ruled Income Tax Unconstitutional  1913 Woodrow Wilson’s term, 16 th Amendment allowed Gov’t to collect income taxes. 1930’s FDR increased taxes to help pay for SOCIAL SECURITY.

references  minimum_wages minimum_wages minimum_wages