1. Lapointe Productions Net Pay and Income Tax
Unit 3-
Lapointe Productions Net Pay and Income Tax

2. Earned Income You work for someone who pays you or
Long-term disability benefits received prior to minimum retirement age
You own or run a business or farm

3. W4s & Allowances

4. Pay Periods Weekly: once a week or 52 times a year.
Biweekly: every two weeks or 26 times a year.
Semimonthly: twice a month or 24 times a year.
Monthly: once a month or 12 times a year.

5. Find the gross earnings per pay period.
Ruth earns $36,000 a year. If she is paid on a weekly basis, what is her gross pay per week?
Divide $36,000 by 52 pay periods.
$692.31
What if she is paid on a semimonthly basis?
$1,384.62

6. Try these examples. Find the gross earnings for:
Carolyn, who earns $15,000 a year and is paid weekly.
Martha, who earns $48,000 a year and is paid biweekly.
Bill, who earns $35,000 a year and is paid semimonthly.
Carolyn= $288.46
Martha= $1,846.15
Bill= $1,458.33

7. Key Terms Gross earnings (gross pay):
Net earnings (net pay/take-home pay):
Gross earnings (gross pay): the amount earned before deductions.
Net earnings (net pay/take-home pay): the amount of your paycheck.

8. Hourly Wage Calculations
Hourly rate or hourly wage: the amount of pay per hour worked based on a standard 40 hour work week.
Overtime rate: rate of pay for hours worked that exceed 40 hours per week.
Time and a half: standard overtime rate that is 1½ (or 1.5) times an hourly rate.

9. Find the gross pay per week based on hourly wages.
Find the regular pay by multiplying the number of hours (40 or less) by the hourly wage.
Find the overtime pay by multiplying the hourly rate by the overtime rate (usually 1.5) and then multiply that rate by the number of hours that exceed 40.
Add the figures from steps 1 and 2.

10. Here’s an example.
Theresa worked 45 hours last week. If her hourly rate is $10.50 per hour, find her total gross earnings.
To calculate straight time: Multiply 40hrs x $10.50 =
To calculate the overtime amount, multiply her hourly rate by 1.5: $10.50 x 1.5 =
To calculate overtime amount: Multiply the overtime rate ($15.75) x the number of overtime hours (5): $15.75 x 5 =
Add the straight time and overtime pay together:
Multiply 40 x $10.50 = $420.00
To calculate the overtime amount, multiply her hourly rate by 1.5: $10.50 x 1.5 = $15.75.
Multiply the overtime rate ($15.75) x the number of overtime hours (5): $15.75 x 5 = $78.75.
Add the regular and overtime pay: $ $78.75= $498.75

11. Try these examples.
The regular hourly rate in the production department for these employees is $6.50.
Overtime is paid at 1.5
Find the weekly earnings for these employees:
Marcus worked 48 hours.
Allison worked 44 hours.
Marcus worked 48 hours.
$338=40* *8
Allison worked 44 hours.
40*6.50+4*9.75= $299

12. Find the gross pay per paycheck based on piecework.
Piecework rate:
Straight piecework rate:
Differential piece rate:
Piecework rate: amount of pay for each acceptable item produced.
Straight piecework rate: piecework rate where the pay per piece is the same no matter how many items are produced.
Differential piece rate (escalating piece rate): piecework rate that increases as more items are produced.

13. Find the gross pay per paycheck based on commission
Commission rate:
Commission:
Straight commission:
Salary plus commission:
Quota:
Commission rate: percent of sales that are eligible for a commission.
Commission: earnings based on sales.
Straight commission: entire pay based on sales.
Salary plus commission: a set amount of pay plus an additional amount based on sales.
Quota: a minimum amount of sales that is required before a commission is applicable.

14. Here’s an example.
Shirley Garcia is a restaurant supplies salesperson and receives 5% of her total sales as commission. Her sales totaled $15,000 during a given week. Find her gross earnings.
Use the formula: P = R x B to find her earnings.
P = 0.05 x $15,000 = $750.
Shirley’s earnings equal $750.

15. Try this example.
Melanie Brooks works for a cosmetics company and earns $200 a week in salary plus 30% commission on all sales over $500.
If she had sales of $1,250 last week, how much were her total earnings?
The commission would be calculated at 30% on $750 in sales or $225. Add this amount to her base salary of $200 and the total is $425.

16. Payroll Deductions
Find federal tax withholding per paycheck using IRS tax tables.
Find Social Security and Medicare tax per paycheck.
Find net earnings per paycheck.

17. Key Terms Income tax: Federal tax withholding: Tax-filing status:
W-4 form:
Income tax: local, state of federal tax paid on one’s income.
Federal tax withholding: the required amount to be withheld from a person’s pay to be paid to the federal government.
Tax-filing status: status based on whether the employee is married, single, or head of household; determines the tax rate.
W-4 form: required form to be held by the employer for determining the amount of federal tax to be withheld.

18. Find federal tax withholding per paycheck using IRS tax tables.
To calculate federal withholding tax using the IRS tax tables, an employer must know:
The employee’s filing status (single, married or head of household)
The number of withholding allowances the employee claims
The type of pay period
The employee’s adjusted gross income

19. Find Social Security and Medicare tax per paycheck or FICA Tax
Comprised of: a 6.2 percent Social Security tax; a 1.45 percent Medicare tax

20. Adjusted gross income Tax-free or tax-deferred benefits
Allowable adjustments to the gross income, such as
qualifying IRAs,
tax-sheltered annuities:
401Ks or 403b, 529, or employee-sponsored childcare or medical plans.
529= Pretax savings plan designed to saving for college expenses

21. Find the withholding tax
Using the tax tables, find the amount of tax to be withheld for the following employees:
Janice Hill, single, paid biweekly, claiming one allowance, and earning $1,700 per pay period.
Bill Melendez, married, paid weekly, claiming 4 allowances and earning $390 per pay period.

22. Calculate the amount
Dollie Calloway’s biweekly gross earnings are $2,050. She is single, has no adjustments to income and claims two withholding allowances on her W-4 form.
Using the tax forms, what is her Federal taxable income?
$249
If Dolly claimed single F on her CT W4, what is her taxable income?
$86.24

23. Find the Medicare tax amount.
Social Security 6.2% of the adjusted gross income.
The Medicare tax amount is calculated at 1.45% (or ) of the adjusted gross income.
Example: Joe’s gross pay is $1,654. How much does he owe in Social Security and Medicare taxes?
SS = $ and Medicare = $23.98

24. Simple Paycheck Stub
12/25/2018

25. The Importance of selecting the right allowance
ANNUAL SALARY
$60,000.00
BiWeekly Salary
$2,500.00
CT WithHolding F
Medical Insurance
401k
Taxable Income
Social Security
Medicare
Federal Income Tax
State Income Tax
2 Allowances
$100.00
$450.00
$1,950.00
$120.90
$28.28
$224.00
$81.02
1 Allowance
$263.00
No Allowances
$301.00
Bi Weekly Net Income
Annual Taxable Income
Annual Income Tax Paid
Tax Return
Amount Owed
$1,495.81
$46,800.00
$5,376.00
$36,450.00
$5,008.00
$368.00
$1,456.81
$6,312.00
$1,304.00
$1,418.81
$7,224.00
$2,216.00