1. Earning Income
Taxes—What are they?

2. Review
What is the significance of a paycheck stub?

3. Paycheck Stub On-The-Go Employee Beakens, Joe SSN 201-92-4856
Check Amount $1,102.98
Employee Address 293 Michael Grove Billings, MT
Pay Type- Gross Pay
Deductions
Current
Year-to-date
 $1,353.33
Federal Withholding State Withholding Social Security Medicare Medical 401K
$ $40.82 $83.91 $19.62 $0.00 $0.00
$ $ $ $ $0.00 $0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004

4. Taxes, Taxes, Taxes Taxes
Compulsory charges imposed on citizens by local, state, and federal governments to fund public goods and services
Two types
Progressive: take a larger percentage of income from high income taxpayers (i.e. the more a person earns, the more taxes paid)
Ex. Federal and State income taxes
Regressive: not based on one’s ability to pay (i.e. as income rises, the tax percentage remains the same or decreases)
Ex. FICA (Social Security – tax base $106,800 for 2010)

5. MANDATORY DEDUCTIONS FROM YOUR PAYCHECK
I Don’t Get It All?
MANDATORY DEDUCTIONS FROM YOUR PAYCHECK
Deduction
What do you get?
Who Pays?
Federal Income Tax
State Income Tax
Local Income Tax
FICA: Social Security Tax
FICA: Medicare Tax
defense, human services, and monitoring and regulating trade
Employee
roads, safety, health
Employee
schools, police, fire protection
Employee
provides for old-age, survivors, and disability insurance
Employee/Employer
provides for certain health care insurance
Employee/Employer

6. I Don’t Get It All? OTHER DEDUCTIONS Deduction What do you get?
Who Pays?
Life Insurance
Long-term Disability
Medical Insurance
Dental Insurance
Retirement Savings Plan
pays a beneficiary in the event that an employee dies
Employer and/or employee
provides benefits in the event that an employee is completely disabled
Employer and/or employee
employee and family insurance coverage for medical expenses
Employer and/or employee
employee and family insurance coverage for dental expenses
Employer and/or employee
tax-deferred savings plan for retirement
Employer and/or employee

7. W-4 Form
How does your employer know how much to take out of your check for taxes?
Fill out when beginning a job
Used for withholding allowances
Dependents
Example for Student & Adult w/ Children on overhead

8. Completing a W-4
Joe Daniels, of 2004 West Wing Avenue, Indyo, Wisconsin 56473, is single, a student and works at the local auto shop. He had no income tax liability last year; however, he isn’t for sure how much he will earn this year. His first two week check was $500. He has no other income, and his parents claim him on their tax return. His social security number is
How many withholdings should he claim?

9. Completing a W-4
Whitney Hawes, of 2893 Green Lake Boulevard, Weyerhauser, Wisconsin 56473, started a new job. She expects to earn about $38,000 this year. Her husband, Simon, works and will earn about $30,000 this year. They have three children. She gets paid semi-monthly. Whitney’s social security number is
How many withholdings should she claim?

10. Review What are the two types of taxes?
Progressive and regressive
What is FICA and who pays for it?
Social security and medicare
What are some other payroll deductions?
Retirement, medical, life insurance, long-term disability, dental, etc.
How do employers know how much to withhold from employees?
W-4 Form