1. Take-Home Pay The deductions taken out of your paycheck help support schools, roads, national parks, and more. Why do you think you have to pay taxes?

2. Lesson Objective Determine the amount withheld for federal income tax. Content Vocabulary federal income tax withholding allowance federal income tax Money withheld by an employer from an employee’s paycheck to pay federal government taxes. withholding allowance The number of people an employee supports, which helps employers know how much money to withhold for federal income tax.

4. Carla Garza’s gross pay for this week is $425.88. She is married and claims 2 allowances—herself and her husband. What amount will be withheld from Garza’s pay for FIT? Example 1

5. Steps: 1.Find the income range from the federal tax tables on pages 788-791 in your textbook. 2.Find the column for 2 allowances. 3.The amount of income to be withheld is $19. Example 1 Answer

6. Lance Han’s gross pay for this week is $386.88. He is married and claims 1 allowance. What amount will be withheld from Han’s pay for FIT? Example 2

7. Steps: 1.Find the income range from the federal tax tables on pages 788-791 in your textbook. 2.Find the column for 1 allowance. 3.The amount of income to be withheld is $31. Example 2 Answer

8. Use the tax tables on pages 788-791 in your texbook to find the amount withheld. Joseph Napoli, single. Earns $524 per week. Claims 2 allowances. What is the FIT withheld? Practice 1

9. $48 Practice 1 Answer

10. Use the tax tables on pages 788-191 in your textbook to find the amount withheld. Amanda Hagel earns $476 a week. She is married and claims 2 allowances. Next year she will have a child and will claim an additional allowance. How much less will be withheld for federal income tax next year? Practice 2

11. $312 Practice 2 Answer

12. Lesson Objective Compute state taxes on a straight percent basis. Content Vocabulary exemption Withholding allowances, which allow for supporting yourself, your spouse, and others in your family who are your dependents.

14. Patricia Line’s gross pay is $65,800 a year. The state income tax rate is 3 percent of taxable wages. Line takes a married exemption for herself and her husband. Use the Personal Exemptions table below to find out how much is withheld from her gross earnings for state income tax within the year. Example 1

15. Personal Exemptions Single:$1,500 Married: 3,600 Each Dependent: 700 Example 1 (cont.)

16. Find the taxable wages. Annual Gross Pay – Personal Exemptions $65,800.00 – $3,000.00 = $62,800.00 Example 1 Answer: Step 1

17. Find the annual tax withheld. Taxable Wages × Tax Rate $62,800.00 × 3% = $1,884.00 Example 1 Answer: Step 2

18. Use the Personal Exemptions table in Example 1 above to find the amount withheld. Tomoko Nakazawa. Earns $38,657 annually. Married, no dependents. What are her personal exemptions? Practice 1

19. $3,000 Practice 1 Answer

20. Paul Chamello earns $168,000. He is single. His personal exemptions include himself and his five children. The state tax rate is 2.5 percent of taxable income. What amount is withheld yearly for state income tax? Practice 2

21. $4,075 Practice 2 Answer

22. Lesson Objective Determine state taxes on a graduated income tax basis. Content Vocabulary graduated income tax A system that increases the tax rate at different levels of income.

24. Louise Maffeo’s annual salary is $34,500. She is paid semi-monthly. Her personal exemptions total $1,500. How much does her employer deduct from each of Maffeo’s semi-monthly paychecks for state income tax? Example 1

25. Figure 2.2

26. Find the taxable wages. Annual Gross Pay – Personal Exemptions $34,500.00 – $1,500.00 = $33,000.00 Example 1 Answer: Step 1

27. Find the annual tax withheld. 1.First $1,000: 1.5% of $ 1,000.00 = $ 15.00 2.Next $2,000: 3.0% of $ 2,000.00 = 60.00 3.Next $2,000: 4.5% of $ 2,000.00 = 90.00 4.Over $5,000: 5.0% of ($33,000.00 – $5,000.00) 5.0% of $28,000.00 = 1,400.00 Total $1,565.00 Example 1 Answer: Step 2

28. Find the tax withheld per pay period. Annual Tax Withheld ÷ Number of Pay Periods per Year $1,565.00 ÷ 24 = $65.208 or $65.21 Example 1 Answer: Step 3

29. Patricia Hanson. Annual gross pay of $24,300. Personal exemption of $1,500. 2 percent state tax on first $5,000. 3 percent state tax on amount over $5,000. What is her taxable income? Practice 1

30. $22,800 Practice 1 Answer

31. Use the following tax table to find the amount of state tax withheld. First $3,5003% Next $3,5004.5% Over $7,0007% Practice 2

32. Caroline Pollack’s gross pay is $31,452. She has personal exemptions of $3,600.. How much is withheld from her semimonthly paycheck for state income tax? Round to the nearest cent. Practice 2 (cont.)

33. $71.76 Practice 2 Answer

34. Lesson Objective Compute the amount withheld for Social Security and Medicare taxes. Content Vocabulary Social Security A federal government program to pay for retirement and disability benefits. Medicare A federal government program to provide medical insurance.

36. Otis Hassan’s gross biweekly pay is $648.00. His earnings to date for the year total $15,228. What amount is deducted from his pay this week for Social Security? For Medicare? What is the total deduction? Example 1

37. Find the Social Security tax withheld. Gross Pay × Tax Rate $648.00 × 6.2% = $40.176 = $40.18 Example 1 Answer: Step 1

38. Find the Medicare tax withheld. Gross Pay × Tax Rate $648.00 × 1.45% = $9.396 or $9.40 Example 1 Answer: Step 2

39. Find the total deduction. Social Security Tax + Medicare Tax $40.18 + $9.40 = $49.58 Example 1 Answer: Step 3

40. Find the Social Security and Medicare taxes withheld for this pay period. Tom Mendoza. Monthly salary $4,800. $52,800 earned this year to date. How much deducted this pay period for Social Security? For Medicare? Practice 1

41. For Social Security: $297.60 For Medicare: $69.60 Practice 1 Answer

42. Stephanie Metcalf earns $91,992 a year. Her salary is paid monthly. What are her year-to- date earnings for November? How much is deducted from her check in November for Social Security? For Medicare? How much is deducted from her check in December for Social Security? For Medicare? Practice 2

43. Year-to-date earnings for November: $84,326 Social Security deduction in November: $475.29 Medicare deduction in November: $111.16 Social Security deduction in December: $35.59 Medicare deduction in December: $111.16 Practice 2 Answer

44. Assignment -

45. Lesson Objective Calculate the deduction for group insurance. Content Vocabulary group insurance Social Security A federal government program to pay for retirement and disability benefits. group insurance Health insurance offered by many businesses to employees, pain in part by the business and in part by the employee.

47. Lawrence Butler has family medical coverage through the group medical plan his employer provides. The annual cost of the plan is $4,500. The company pays 80 percent. How much does Butler pay annually? Example 1

48. Find the percent paid by employee. 100% – Percent Company Pays 100% – 80% = 20% Example 1 Answer: Step 1

49. Find the total amount paid by employee. Annual Amount × Employee’s Percent $4,500 × 20% = $900.00 Example 1 Answer: Step 2

50. Nicholette McClure has family medical coverage through the group medical plan her employer provides. The annual cost of the plan is $5,000. The company pays 75 percent. How much is deducted from her biweekly paycheck for medical insurance? Example 2

51. Find the percent paid by employee. 100% – Percent Company Pays 100% – 75% = 25% Example 2 Answer: Step 1

52. Find the total amount paid by employee. Annual Amount × Employee’s Percent $5,000 × 25% = $1,250 Example 2 Answer: Step 2

53. Find the deduction per pay period. Total Annual Amount Paid by Employee Number of Pay Periods per Year $1,250 ÷ 26 = $48.08 Example 2 Answer: Step 3

54. Annual cost of insurance: $4,160. Employer pays 80 percent. 52 pay periods. Find the deduction per pay period. Practice 1

55. $16 Practice 1 Answer

56. Ken Fujimoto’s employer pays 90 percent of his medical insurance and 60 percent of his dental insurance. Medical insurance costs $3,400 per year and dental insurance is $1,300. How much is deducted from Ken’s semimonthly pay for medical insurance? How much for dental insurance? Practice 2

57. Medical: $14.17 Dental: $21.67 Practice 2 Answer

58. net pay The amount of money you have left after your employer subtracts all tax withholdings and personal deductions from your gross pay, also called net income or take-home pay. Lesson Objective Calculate net pay per pay period. Content Vocabulary net pay

60. Alysha Moore’s gross weekly salary is $600. She is married and claims 3 allowances. The Social Security tax is 6.2 percent. The Medicare tax is 1.45 percent. The state tax is 1.5 percent. Each week she pays $12.40 for medical insurance and $2.50 for charity. Is Moore’s earnings statement correct? Example 1

61. Figure 2.4

62. Find the total deductions. a. Federal withholding $35.00 b. Social Security: 6.2% of $600.00 37.20 c. Medicare: 1.45% of $600.00 8.70 d. State tax: 1.5% of $600.00 9.00 e. Medical insurance 12.00 f. Charity 2.50 Total $104.80 Example 1 Answer: Step 1

63. Find the net pay. Gross Pay – Total Deductions $600.00 – $104.80 = $495.20 Her statement is correct. Example 1 Answer: Step 2

64. Find the deductions and the net pay. Social Security is 6.2 percent of the first $84,900. Medicare is 1.45 percent of all income. Use the tax tables on pages 788-791 in your textbook for federal tax. Round to the nearest cent. Practice 1

65. Pierre Lamont is married and claims 4 allowances. His gross weekly salary is $628. Each week he pays federal, Social Security, and Medicare taxes, as well as $28 for medical insurance and $12 for union dues. What are his deductions and his net pay? Practice 1 (cont.)

66. Federal: $29 Social Security: $38.94 Medicare: $9.11 Net pay: $510.95 Practice 1 Answer

67. Find the deductions and the net pay. Social Security is 6.2 percent of the first $84,900. Medicare is 1.45 percent of all income. Use the tax tables on pages 788-791 in your textbook for federal tax. Round to the nearest cent. Practice 2

68. Michele Sawyer is single and claims 1 allowance. She earns $11.50 per hour as a pest controller and works 40 hours. Deductions include federal income tax, Social Security, and Medicare. Practice 2 (cont.)

69. State taxes are 4 percent of gross income, and local taxes are 2 percent of gross income. She pays $42.75 per week for medical insurance. What are her deductions and net pay for the week? Practice 2 (cont.)

70. Federal: $48 Social Security: $28.52 Medicare: $6.67 State tax: $18.40 Local tax: $9.20 Medical insurance: $42.75 Net pay: $306.46 Practice 2 Answer

71. SummarySummary Types of Agencies Pay Deductions Your employer takes deductions from your paycheck for the government and other agencies. State Income Tax Federal Income Tax Social Security pays for retirement and disability benefits. Group Health Insurance is often less expensive than individual insurance.

72. A.$14.00 B.$15.00 C.$19.00 D.$20.00 1.Tonya Westin’s gross pay for the week is $357.89. She is married and claims no allowances. Use the table on page A4 in the text. What amount will be withheld for FIT?

73. 2.Dwight Fisher earns $42,500. He is married with three dependents which gives him a $10,000 exemption. His state had an income tax rate of 4.5%. How much does Dwight’s employer withhold annually from his gross earnings for state income tax? A.$450.00 B.$1,230.90 C.$1,462.50 D.$1,912.50

74. 3.ALGEBRA Reena Garcia is a sales manager. She is single and takes a $2,000 exemption. The state income tax rate is 3%. If her employer withholds $3,900 for state income tax annually, find her annual salary. A.$85,400 B.$101,250 C.$125,600 D.$132,000

75. 4.Mary Jane Porter has an annual gross pay of $32,100. Her exemptions total $3,500. The state tax on the first $5,000 is 1.5% and on amounts over $5,000 is 4.2%. Find the total tax withheld. A.$1,009.85 B.$1,066.20 C.$1,213.20 D.$1,430.85

76. 5.Kyle Gruber’s gross pay this month is $5,432.50. His earnings to date for the year total $12,300.75. How much does his employer deduct from his paycheck this month for Social Security? A.$336.82 B.$356.59 C.$511.85 D.$575.60

77. 6.Sui Chun’s gross pay last week was $2,350. Her earnings to date for the year are $43,500. How much did her employer deduct from her paycheck last week for Medicare? A.$34.08 B.$47.00 C.$58.75 D.$65.90

78. 7.Tamara Matta’s annual group insurance costs $5,800, and her company pays 75% of the cost. How much does Tamara pay monthly for insurance? A.$100.90 B.$120.83 C.$280.50 D.$362.50

79. 8.ALGEBRA Danford Kayne pays $231.60 per month for his group medical coverage. His employer pays 35% of the cost. How much is the annual premium for Danford’s health insurance? A.$2,779.20 B.$3,843.10 C.$4,275.69 D.$5,904.33

80. 9.Erika Morley’s gross weekly salary is $825.75. She is married with no dependents. The following deductions are made each week: $31.00 for federal tax; 6.45% for Social Security and 1.45% for Medicare; $42.50 for medical insurance. The state tax rate is 1.5% of gross. What is Erika’s net pay? A.$543.96 B.$550.76 C.$612.09 D.$676.69

81. 10.ALGEBRA The deductions from Allana Cole’s monthly pay are federal income tax of $98, state income tax of 2.1%, city income tax of 1.1%, Social Security of 6.45%, and Medicare of 1.45%. Her monthly net pay is $2,754.80. Find Allana’s monthly gross pay. A.$2,900 B.$3,200 C.$3,500 D.$4,000

82. End of Chapter 2 Net Income