1. Paychecks and Tax Forms Take Charge of your Finances
Family Economics & Financial Education
Paychecks and Tax Forms Take Charge of your Finances
Changes on slide 3, 18

2. Types of Pay
When you’re offered a job, you want to understand how your rate of pay is figured. Pay is calculated in different ways:
Salary: a set amount of money earned by an employee per year or for a fixed length of time
Paid a regular intervals: Weekly, bi-weekly, monthly
Each paycheck represents the total salary for the year, divided by number of pay periods in year minus deductions & taxes

3. Salary $43,500/ 52 weeks=$837 per week.
Once deductions and taxes are taken out check is significantly less.
Paychecks are consistently the same each check.

4. Types of Pay-Wages
Wages are earnings that are paid by the hour day or item.
$10 per hour, multiplied by 10 hours of work=$100.
Instead of receiving hourly wages, some employees do “Piecework”, work for which wages are based on the number of items or pieces produced.
Usually requires assembly or manufacture.

5. Type of Pay: Commission
Commission is a fixed percentage or amount of profit given to an employee in exchange for making a sale.
Real Estate Agent, Car Salesman, Furniture Salesman
Some employees earn hourly wage and commission.

6. Types of Pay: Tips & Bonuses
A bonus is a sum of money paid to an employee in addition to regular pay.
Sometimes when employees meet certain goals or perform especially well
Tips are money given to an employee by customers in exchange for a service.
Many employee’s work solely off tips, so it can be substantial to their income.

7. Regulations Affecting Pay
The Fair Labor Standards Act (FLSA) makes sure workers are paid fairly across many areas.
Equal Pay: forbids employers from paying 1 person less than another for the same work
Minimum Wage: The lowest hourly rate an employer may legally pay most workers.
Raised Periodically to keep up with inflation
Sub-minimum wage: Set lower than standard minimum wage, applied to full time students, employee’s younger than 20, and the developmentally disabled.

8. Regulations Affecting Pay
Fair Labor Standards Act cont…
Overtime: Most jobs that pay hourly wages are based on standard 40 hours/week. Anything in excess of 40 hours per week is classified as overtime.
In most cases, compensation for overtime must be at least 1.5 times the employee’s regular rate of pay
Salaried Employee’s are exempt from overtime pay.

9. Where Does My Money Go?
Almost 31% of an individual’s paycheck is deducted
Taxes are the largest expense most individuals will have
Therefore, it is important to understand the systematic deductions
U.S. tax system operates on an ongoing payment system
Taxes are immediately paid on income earned

10. Where does my Money Go?
Types of Benefits: A job that pays less but offers more benefits is best in the long run. Here are the types of benefits you can get from employment.
Insurance: Health care plan that allows employees and their dependents access to health care at a reduced cost. Other types of insurance may be offered.

11. Define the vocabulary on page 191 and 196
Answer questions 1-3 on page 195 & 1-4 on 206

12. Types of Benefits
Savings & Retirement Benefits: Employer deducts money from employee’s check to deposit in a savings or investing account.
Some of the money may be deducted on a pre-tax basis-which reduces the amount of income tax the employee has to pay.
After a certain amount of time the employee becomes vested, or entitled to some or all of their money.

13. Types of Benefits
Other Benefits: Offers such as paid holidays, vacation, sick days, additional education or job training to help learn new skills.

14. Employment Classifications
Full Time: Wage or salary jobs at least 35 hours per week.
Part time: Less than 35 hours per week, no matter what the pay-usually not eligible for benefits.
Temporary: Hired to fill temporary vacancy or to help with additional work.
Contract: Hired for specified time period at hourly or total project rate.

15. Three methods employers may use to
Paying Employees
Three methods employers may use to
pay employees:
Paycheck – payment given with a paper check with a paycheck stub attached
Most common method
Employee responsible for handling the paycheck
Immediately see paycheck stub and deductions

16. Paying Employees continued
Direct Deposit - employers directly deposit employee’s paycheck into the authorized employee’s depository institution account
Employee receives the paycheck stub detailing the paycheck deductions
Most secure because there is no direct handling of the check
Employee knows exactly when paycheck will be deposited and available

17. Paying Employees continued
Payroll Card - payment electronically loaded onto a plastic card
Funds are directly deposited by an employer into an account at a depository institution that is linked to the payroll card
Parties involved:
Employer
Employee
Depository institution
Use the payroll card for ATM withdrawals or to make purchases

18. Deductions
Gross pay is the total amount of money earned for working during the pay period.
Multiplying the number of hours worked by the rate will show you your gross pay.
A deduction is anything that is subtracted from gross pay.
Benefits, tax-withholdings, etc.
Net Pay is the amount that is left after deductions.

19. Taxes
Taxes – Required charges imposed on citizens by local, state, and federal governments
Used to provide public goods and services
Largest amount of taxes a person pays is on his/her income
Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress

20. Starting a New Job To receive a paycheck, an employee must:
Complete a Form W-4
Employee’s Withholding Allowance Certificate
Complete a Form I-9
Employment Eligibility Verification

22. Form W-4 Employee’s Withholding Allowance Certificate Allowances
Determines the percentage of gross pay which will be withheld for taxes
Allowances
Used to determine the amount of federal taxes withheld from the paycheck
A person may claim a personal allowance if no one else claims the person as a dependent
Dependent – a person who relies on the taxpayer for financial support

23. Form W-4
Exempt Status: You may be exempt, or excused, from having income tax withheld.
If you didn’t have to pay taxes the previous year, and you expect to have too little income to pay taxes in the current year; you can write “exempt” in line.
How to complete a W4:

24. Steps to Completing a Form W-4
Print or type legal name on Line 1 and home address directly below the name
Write Social Security number on Line 2
On Line 3, check the appropriate box to indicate marital status
Enter a zero on Line 5 if not claiming any allowances
Sign name and date the form before giving it to the employer
Keep a copy for personal records

25. Form I-9 Employment Eligibility Verification Form
Used to verify the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States
Must provide documentation which establishes identity and employment eligibility
Examples include driver’s license, Passport, Social Security card, and birth certificate

26. Family Economics & Financial Education
Reading a Paycheck

27. Paycheck Stub Paycheck Stub
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Paycheck Stub
A document included each pay period which outlines paycheck deductions

28. Personal Information Personal Information
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Personal Information
States the employee’s full name, address, and Social Security or Employee Identification number
Always check to ensure this information is correct

29. Pay Period
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Pay Period
The length of time for which an employee’s wages are calculated; most are weekly, bi-weekly, twice a month, or monthly
The last day of the pay period is not always payday to allow a business to accurately compute wages

30. Gross Pay
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
changed the last sentence, it used to say “If a person is on salary, it is the total salary amount divided by the specified time period”
Gross Pay
The total amount of money earned during a pay period before deductions
This is calculated by multiplying the number of hours worked by the hourly rate
If a person is on salary, it is the total salary amount divided by the specified number of pay periods

31. Net Pay
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Net Pay
The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

32. Deductions Deductions
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Deductions
The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits

33. Federal Withholding Tax
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
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 Form W-4
Largest deduction withheld from an employee’s gross income

34. State Withholding Tax State Withholding Tax
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
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

35. FICA (Federal Insurance Contribution Act)
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
FICA
This tax includes two separate taxes: Fed OASDI/EE or Social Security and Fed MED/EE or Medicare
These two taxes can be combined as one line item or itemized separately on a paycheck stub

36. Social Security Social Security
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Social Security
Nation’s retirement program, helps provide retirement income for elderly and pays disability benefits
Based upon a percentage (6.2%) of gross income, employer matches the contribution made by the employee

37. Medicare
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Medicare
Nation’s health care program for the elderly and disabled, provides hospital and medical insurance to those who qualify
Based upon a percentage (1.45%) of gross income

38. Medical
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Medical
The amount taken from the employee’s paycheck for medical benefits
Occurs when the employer has a medical plan for employees but does not pay full coverage for his/her benefits

39. Retirement Plan Retirement Plan
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Retirement Plan
The amount an employee contributes each pay period to a retirement plan
A specified percentage of the contribution is often matched by the employer
May be a 401K, a state, or local retirement plan

40. Year-to-Date Year-to-Date
On-The-Go
Employee Beakens, Joe
Employee Identification
Check # 164
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 Fed OASDI/EE or Social Security
Fed MED/EE or 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
Year-to-Date
Total of all of the 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