1. Aim: How can we understand how gross income becomes net income by analyzing our paycheck deductions?
Do Now: Name and describe the three ways an employer can provide an employee with their pay?

3. Reading a Paycheck Why is your paycheck lower than you thought?
Gross Income
Net Income

4. What gets taken out?
Deductions from your paycheck are also called “withholdings,” and they fall into different categories.
Typically about 30% of your paycheck!
Common categories of deductions include:
Federal income tax
State income tax
Local income or wage tax (when applicable)
Social Security and Medicare (AKA FICA)
Optional Deductions
Retirement plans
Health insurance and other insurance

5. Aim: How can we understand how gross income becomes net income by analyzing our paycheck deductions?
Do Now: Explain the difference between a salary and a pay rate (wage). Which would you prefer and why?

6. Personal Information Personal Information
States the employee’s full name, address, and social security number
Always check to ensure this information is correct

7. Pay Period
Pay Period
The length of time for which an employee’s wages are calculated; most are weekly, bi-weekly, twice a month, or monthly

8. Gross Pay Gross Pay Net Pay
The total amount of money earned during a pay period before deductions
Net Pay
The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

9. Federal Withholding Tax
The amount required by law for employers to withhold from earned wages to pay taxes
The amount of money deducted depends on the amount earned and information provided on the W-4 Form
Largest deduction withheld from an employee’s gross income

10. Do Now: What are optional deductions? Which are mandatory?
Aim: How can we understand how gross income becomes net income by analyzing our paycheck deductions?
Do Now: What are optional deductions? Which are mandatory?

11. State Withholding Tax State Withholding Tax
The percentage deducted from an individual’s paycheck to assist in funding government agencies within the state
The percentage deducted depends on the amount of gross pay earned

12. FICA (Federal Insurance Contribution Act)
There are two parts of FICA and they may be listed separately:
Social Security aka OASDI: This is short for Old-Age, Survivors, and Disability Insurance (6.2 %)
Medicare: Which provides health insurance after you retire (1.45%)

13. Other Possible Deductions
Medical
Occurs when the employer has a medical plan for employees but does not pay full coverage for his/her benefits
Retirement Plan - The amount an employee contributes each pay period to a retirement plan
May be a 401K, a state, or personal retirement plan

14. Other Terms Current YTD (Year-to-date)
Total of all of the earnings and deductions which have been withheld from an individual’s during this pay period.
YTD (Year-to-date)
Total of all of the earnings and deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub