1. Chapter 2 Income, Benefits, and Taxes

2. What Are the Sources of Earned Income?
A wage is pay for each hour worked.
Minimum wage – lowest rate by law
Overtime – 1½ times regular rate
A salary is pay for each month or year worked.
A tip is a gift of money for a service.
A commission is a set fee or percentage of a sale.
Missouri Minimum Wage= $7.35
Show how much is made in one year
2-1 Earned Income and Benefits
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3. Minimum Wage Laws 2-1 Earned Income and Benefits
Ask the question: Does minimum wage affect everyone? If so, how?
Show a graph for minimum wages effect on jobs
Minimum wage could result in higher prices for consumers.
2-1 Earned Income and Benefits
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4. What Is Self-Employment?
Self-employment is working for yourself.
An entrepreneur is someone who is self-employed and owns a business.
Lifestyle businesses
Venture businesses
2-1 Earned Income and Benefits
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5. Owning A Business Advantages Make all the decisions
Work on your own schedule
Reap all the rewards and profits
Disadvantages
Carry all the risks
Hard to get up and running
Huge commitment
Work long hours and can often not afford to hire help

6. Types of Small Business
Lifestyle Business: owner(s) intend to keep the business small.
Venture Business: Want their business to grow into a large company with unlimited growth and many workers.

7. How Do I Get Started?
If your parents own a business, you are much more likely to start a business.
A good place to start is talking with the advisors at a Small Business Development Center (SBDC)

8. What Are Employee Benefits?
Benefits are forms of pay other than salary or wages.
Pay without work
Refers to times
when an employee
who is not work will be paid.
Sick Leave
Personal Leave
Pay without work- Holidays
Education- Pay for tuition
Perks- Gym memberships
Insurance/HSAs- Medical/Dental
Retirement plans- 401K, IRA
Profit-sharing plans- payments to employees dependent upon the company's profitability
Stock option plans- Offering stock at a discount
2-1 Earned Income and Benefits
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9. What Are Employee Benefits?
Education: Plans that will pay for, share the cost of, reimburse money spent on education
Perks: Parking space, expense accounts, office with a view, etc.
Insurance/HSAs: Important benefit for many workers
Price paid for health insurance is called a premium.
Group Life: Life insurance for the employees
Disability: Provides payments to replace income lost when illness or injury prevents the employee from working.
Workers Compensation: pays for medical and disability benefits to workers who are injured or contract diseases on the job.
Pay without work- Holidays
Education- Pay for tuition
Perks- Gym memberships
Insurance/HSAs- Medical/Dental
Retirement plans- 401K, IRA
Profit-sharing plans- payments to employees dependent upon the company's profitability
Stock option plans- Offering stock at a discount
2-1 Earned Income and Benefits
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10. What Are Employee Benefits?
Retirement plans: an account into which employees contribute portion of their earnings into retirement.
401(k)
Profit-sharing plans: Allows employees to share profits of the business
Bonus
Stock option plans: Allow employees to buy stock at a reduced price.
Health Spending Account (HSA): Allows employees to set aside money (pretax) to pay for qualified medical expenses.
Often used by employees with high deductible insurance plans
Pay without work- Holidays
Education- Pay for tuition
Perks- Gym memberships
Insurance/HSAs- Medical/Dental
Retirement plans- 401K, IRA
Profit-sharing plans- payments to employees dependent upon the company's profitability
Stock option plans- Offering stock at a discount
2-1 Earned Income and Benefits
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11. Success Skills Teamwork Set clear goals and create a plan.
Define the duties of each team member.
Identify how success will be measured.
Identify problems the team may face.
Have regular meetings.
Build on the strengths of team members.
Recognize accomplishments.
2-1 Earned Income and Benefits
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12. What Is Unearned Income?
Variable Income
Salaries and wages
Interest
Business profits
Tips
Dividends
Rents
Commissions
Capital gains
Royalties
Bonuses
Gambling winnings
Farm Income
Professional fees
Alimony
Social security benefits
Pensions
Annuities
Unemployment compensation
2-2 Unearned Income and Benefits
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13. Unearned Income
Money received from sources other than working in a job
Government Transfer Payments: Money and benefits received from local, state, or federal governments.
Social Security
Medicare
In-Cash Payments: money in the form of a check, debit card, or other direct payment given to a person needing assistance.
In-Kind Payments: Made indirectly on a person’s behalf or paid in a form other than money to those in need.
Food Stamps
Rent Subsidies

14. What Type of Taxes Do You Pay?
Taxes are based on consumption, income, and wealth.
Direct taxes are paid directly to the government.
Examples: income and property taxes
Indirect taxes are charged on goods or services bought by the consumer.
Examples: use, excise, and sales taxes
2-2 Unearned Income and Benefits
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15. Taxes
Use Taxes: paid by people who use certain goods or services provided by the government
National Park tax
Excise Tax: charged on the purchase of specific goods, such as gasoline, tobacco, and alcohol.
Sales Tax: Added to the purchase price of consumer goods and services

16. Taxes Based on Income
Income Tax: to be paid on earned and unearned income.
Progressive Tax: The more you earn, the more you pay in tax.

17. Taxes Based On Wealth
Property Taxes: tax based on the property’s assessed value.
Business personal property tax: tax on property other than real estate.
Equipment
Estate Tax: taxes against the estate of a person who has died
Gift tax: taxes on money given over 13,000 within a tax year.

18. How Do You Benefit from Paying Taxes?
Direct benefits
Examples: social security, police, national parks
Indirect benefits
Examples: public education for citizens, free vaccines
2-2 Unearned Income and Benefits
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19. Tax the Rich Cartoon
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20. The Critque
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21. Building Communications Skills
Critical Listening
Evaluate the information you hear.
Consider only important or relevant information.
Make good decisions based on what is accurate and useful.
2-2 Unearned Income and Benefits
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22. Focus On . . . Social Security Benefits
Workers pay into the social security fund through payroll deductions.
A social security number is assigned to each person.
Employers match the payments.
Upon retirement, workers receive a monthly benefit check.
2-2 Unearned Income and Benefits
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23. What Are Paycheck Deductions?
A deduction is money withheld from a paycheck.
Required deduction examples: income tax, social security tax, Medicare tax
Optional deduction examples: health insurance, savings plan
Gross pay is total salary or wages.
Net pay is gross pay minus deductions.
2-3 Taxes and Other Deductions
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24. Deductions
Exemption: person you claim on your tax return as a dependent
Dependent: person who depends on you for more than half of his or her support.
Social Security Tax: Withheld by government, provides a system of old-age, survivors, and disability insurance.
Medicare Tax: withheld by government to pay for medical care for people 65 and older.

25. What Tax Forms Must Be Filed?
W-2 – reports a worker’s taxable income for the year
W-4 – how much money to withhold from your paycheck for federal taxes
1040EZ – a tax return for filers with no dependents or itemized deductions
1040A – a tax return that allows more options for income and deductions
1099-INT – reports interest earned
2-3 Taxes and Other Deductions
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26. Form W-2
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27. Form W-2
2-3 Taxes and Other Deductions
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28. W-4 Form Explained
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29. W-4 Form
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30. W-4 Cont.
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31. E-Filing It is a fast and safe way to file a tax return.
You can e-file yourself or hire an authorized e-file provider.
Those who meet adjusted gross income requirements can e-file free.
Refunds are often received much quicker.
2-3 Taxes and Other Deductions
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32. What Happens to Our Tax Dollars?
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33. The Critique
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