1. Paychecks and Tax Forms Take Charge of your Finances
Family Economics & Financial Education
Paychecks and Tax Forms Take Charge of your Finances

2. Where Does My Money Go?
Imagine you have just started your first job! After the first week, you have earned $100. About how much money would you receive in your first paycheck??
A) $100
B) $84
C) $69
D) $55

3. Where Does My Money Go?
Up to 31% of an individual’s paycheck is deducted. Your net paycheck many only be about $69!
How do you get from $100 all the way down to $69?
Let’s take a look…

4. Family Economics & Financial Education
Reading a Paycheck

5. Paycheck Stub Employee Beakens, Joe SSN 201-92-4856 Check # 164
On-The-Go
Employee Beakens, Joe
SSN
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 6/11/2012-6/11/2012

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
The last day of the pay period is not always payday to allow a business to accurately compute wages

8. Gross Pay
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 time period

9. Net Pay
Net Pay
The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

10. Deductions Deductions
The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits

11. Taxes
What are taxes?
Mandatory charges imposed on citizens by local, state, and federal governments.
What are they used for?
To provide public goods and services
(Name a few we have already discussed)
Largest amount of taxes a person pays is on his/her income.
Internal Revenue Service (IRS) – Collects federal taxes, and enforces tax laws written by the United States Congress.

12. Federal Withholding Tax
The amount required by law for employers to withhold from earned wages
to pay taxes (Tax Brackets based on income: 10%, 15%, 25%, 28%, 33%, 35%)
The amount of money deducted depends on the amount earned and information provided on the Form W-4 (In this case under 10% was deducted)
Largest deduction withheld from an employee’s gross income

13. State Withholding Tax State Withholding Tax (Approx. 3% in this case)
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

14. FICA (Federal Insurance Contribution Act)
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

15. Social Security 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

16. Medicare
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

17. Voluntary Deductions
Voluntary (OPTIONAL) Deductions – money withheld voluntarily by employee such as:
Medical Insurance
Retirement Plans – Saving Bonds, 401K & 403B
Union Dues
Dependent Care Accounts
Disability Insurance
Life Insurance

18. Let’s calculate some paychecks!
See Page 74 in your book: Making Academic Connections:
Complete a.- d. with a partner
Math: Reminder:
Gross pay is calculated by multiplying
regular hours times regular pay and adding any overtime
hours multiplied by overtime pay.
Do you remember HOW OVERTIME PAY IS CALCULATED??
Net pay is determined by subtracting any deductions
from gross pay

19. EXAMPLE:
You worked 45 hours last week and pay is $10/hr. What is your gross pay?
Deductions: 10% federal income tax, 6.2% social security, 1.45% Medicare
What is your NET PAY?
40 x $10 = $400 regular pay
5 x $15 = $75 overtime pay (1 ½ x regular pay)
Gross Pay = $475
$475 x 10% = $47.50 federal income tax
$475 x 6.2% = $29.75 social security
$475 x 1.45% = $6.88 medicare
Totals Deductions = = $84.14
$475 – = $ net pay (a.k.a. take home pay)

20. Gross Pay = $368 Gross Pay = $478.40 Net pay = $304.47
Answers to Page 74, Math
Gross Pay = $368
Gross Pay = $478.40
Net pay = $304.47
Net pay = $307.58

22. Opener: Calculate and reflect the following:
Figure out your weekly, monthly, and yearly earned income if working a job
at minimum wage ($7.25/hr.) for 40 hours a week for a year.
W = M = Y =
Next figure out your weekly monthly and yearly income if working a job at $12.00/hr for 40 hours a week for a year.
W= M = Y =
Now calculate the weekly, monthly and yearly income for a job with median starting pay for a Bachelor’s degree ($24/hr) for 40 hours a week for a year.
W = M = Y =
Sum up your thoughts about these results

23. Retirement Plan Retirement Plan
The amount an employee contributes each pay period to a retirement plan (Usually funded with Pre-Tax dollars)
May be a 401K, a state, or local retirement plan

24. Medical
Medical
The amount taken from the employee’s paycheck for medical benefits
Medical benefits usually include medical insurance, dental, etc.

25. Year-to-Date 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

26. What Are Employee Benefits?
Benefits are forms of pay other than salary or wages.
Pay without work (i.e. Holidays, vacations, sick pay)
Education (Tuition reimbursement)
Perks
Insurance (Medical, Dental)
Retirement plans
Profit-sharing plans
Stock option plans
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