Lesson Objective Compute the amount withheld for Social Security and Medicare taxes . Two separate programs!

1. Lesson Objective Compute the amount withheld for Social Security and Medicare taxes. Two separate programs! Content Vocabulary • Social Security • Medicare Social Security A federal government program to pay for retirement and disability benefits.

2. Calculating Social Security taxes • Social Security Tax Withheld = Gross Pay x Social Security Tax % (.062) • (Social Security Tax Rate = 6.2% of the first $110,100 earned per year) • Write this in your notes: The book uses $97,500 instead of $110,100 • What happens after that?????? • Progressive, Regressive, Proportional (flat)

3. Categories of taxes: Compared to your income • Progressive • Federal • Proportional (flat) • Local , Medicare, Social security on first $110 100, • PA State, Unemployment • Regressive • Excise tax, property tax • Sales Tax • Usually taxes that are not based on your income

4. Social Security (6.2%) • Social Security Tax • 6.2% (.062) • $0.00 $110,100 0 % on remaining income for tax year

5. Calculating Medicare tax: • Medicare Tax Withheld = Gross Pay x Medicare Tax % • (Medicare Tax Rate = 1.45% of all earnings) • Your employer must also contribute an amount that equals your Social Security and Medicare contributions.

6. Medicare 1353. 33 x .0145 = ?????

7. Back checking:Social security deduction / Gross pay =Medicare deduction/ Gross pay =

8. Results:

9. Aaron’s gross biweekly pay is $728.00. His earnings to date (so far this year) total $26,208. What amount is deducted from each pay for Social Security taxes? For Medicare taxes? What is the total deduction? Find the Social Security tax withheld: • 728.00 x 6.2% = $45.136 = $45.14 • Find the Medicare tax withheld: • $728.00 x 1.45% = $10.556 = $10.56 • Find the total deduction: • $45.14 + $10.56 = $55.70

10. Carrie’s weekly pay is $2,500. Her earnings to date for this year total $110,100. What amount is deducted from her pay for Social Security taxes? What amount is deducted for Medicare? • What amount is deducted for Social Security? • Nothing—she has already earned over $110,100 • What amount is deducted from her pay for Medicare taxes? • $2,500 x 1.45% = $36.25 • Find the total deduction. $36.25

11. Closure: • What is the problem with Social Security? • What should you do now to prepare? • What is the current rate deducted for SS? • What is the current rate deducted for Medicare?

12. Assignment: Section 2.4, p. 138, 7-10, 11 (challenge) For #11, calculate pay per month first and remember that the cap in the book on SS is $97,500. Must use the book’s number to calculate this problem.

13. Answer Key for 2.4 assignment: 7, 8 • (a) $385.83 ($6,223 x .062) (b) 90.23 ($6,223 x .0145) 8. (a) $117.39$45,440 x .062 = $2,817.28 ÷ 24 (rounded) $27.45 $45,440 x .0145 = $658.88 ÷ 24 (b) $144.84 $117.39 + $27.45

14. Answer Key for 2.4 assignment: 9, 10 9. a) $41.00tax tables $32.61 $526 x .062 $7.63 $526 x .0145 • $81.24 $41 + $32.61 + $7.63 10. (a) $27.00 tax tables $34.10 $550 x .062 $7.98 $550 x .0145 (b) $69.08 $27 + $34.10 + $7.98

15. Answer Key for 2.4 assignment: 11 11. (a) SS = $475.33 $98,000 ÷ 12 = $8,166.67 per month  As of end of November she has been paid 89,833.37 (8166.67 x 11) You only pay SS on the first $97,500  She is owed $8,166.67 for her December paycheck She will not pay full SS on her December paycheck because she will pass the $97,500 cap. Ex: (89,833.37 + 8,166.67 = 98,000.94) Subtract to find out what amount to use to calculate Social Security 97,500 – 89,899.37 = 7,666.63  She owes SS on $7,666.63 $7,666.63 x .062 = $475.33