1. Understanding Your Paycheck
Economics
Ms. McRoy

2. Aim
Where does all the money in my paycheck go?

3. Do-Now
Imagine that you’ve been working as a lifeguard this semester for the NYC Dept. of Parks and Recreation.
You just received a check for the last two weeks you worked.
How would you figure out if you were paid the right amount?

4. Types of Income What is it? What major types are there?
The money people receive in exchange for their work.
What major types are there?
Salaries: an annual amount paid on a monthly, semi-monthly, or bi-weekly basis. (e.g. Banking Analyst: base salary $75,000 per year)
Wages: calculated by multiplying the hours worked by an hourly pay rate.
(e.g. Doug worked 40 hours last week at a rate of $15/hour)

5. How do you get your money?
Paycheck
An actual check provided to the employee by the employer.
Direct Deposit
When your employer directly transfers the money into your checking or savings account. (e.g. EFT)
Payroll Card
A pre-paid card that is given to employees.

6. Understanding Your Paycheck Activity
Break up into pairs.
Read the article, “Where does all your money go?” and complete the applicable parts of your worksheet.
For the key terms not covered in the article, given the context, take a stab at what they mean.

7. Reading a Paycheck

8. What determines the amount of taxes you pay?

9. What determines the amount of taxes you pay?
Form W-4 (Federal) & IT2104 (NY State
(Employee’s Withholding Allowance)
You must complete one for every new job.
Your allowances (aka exemptions) depend on:
head of household
the number of dependents
whether you have a second job
your marital status and filing status
any additional amount the you may want to withhold
The more allowances (aka exemptions) you have, the less you have taken out from each paycheck in taxes.

10. Reading a Paycheck

11. Additional Deductions
Pension – Voluntary/Involuntary
Garnishments – Involuntary
E.g. Defaulted student loans, child support, alimony, and/or unpaid taxes.
Medical Insurance - Voluntary
Dental Insurance - Voluntary
Vision Service Plan (VSP) - Voluntary
Life Insurance – Voluntary
401(k)/403(b) – Voluntary
STD/LTD/Disability Income Insurance - Voluntary

12. Form W-2
At the beginning of the next calendar year, you will get a Form W-2.
It’s a summary of a person's actual earnings and tax withholdings for an entire year.

13. Sample W-2
Real World Business
Chicago, IL 60640
Irma Money
2301 South Jackson
16,680.24
1,728.00
241.92 IL
440.40 D
When you file your Form 1040 next year, you will include your W-2’s as proof of taxes withheld.
What will happen if you had too much federal/state income tax withheld? Too little?

14. Filing Tax Returns
Federal NY State

15. What needs to be reported?
To be safe, report everything.
E.g. wages, tips, salary, rental income, interest, dividends, lottery winnings, gambling winnings, etc.

16. “Aim”
Where does all the money in my paycheck go?

17. Getting a Paycheck Advantages: Disadvantages:
Employee gets a physical check.
Employee gets to decide what to do with it, right away.
Disadvantages:
Employee is responsible for the check, but the check may get lost.
It costs more money for companies to print paychecks than to use direct deposit.

18. Using Direct Deposit Advantages: Disadvantages:
Employer has lower processing costs.
Employer (not the employee) deposits the check.  Less risk for the employee!
Employee can still see his/her paystub to see deductions taken.
Disadvantages:
Employee needs to have a depository institution (aka bank) where the money can go.

19. Using a Payroll Card Advantages: Disadvantages:
Employers have lower processing costs
It’s safer than carrying cash (need a P.I.N.)
Employees are able to make online purchases
Disadvantages:
Potential fees. (e.g. annual fee, ATM fee, inactivity fee, replacement fee, etc)