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Paychecks and Taxes Take Charge of your Finances

Family Economics & Financial Education. Paychecks and Taxes Take Charge of your Finances. 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

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Paychecks and Taxes Take Charge of your Finances

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  1. Family Economics & Financial Education Paychecks and TaxesTake 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? • Almost 31% of an individual’s paycheck is deducted. Your net paycheck would be only about $69! • How do you get from $100 all the way down to $69???? Might be worth taking a look, right?

  4. Family Economics & Financial Education Reading a Paycheck

  5. Paycheck Stub

  6. Personal Information • Personal Information • States the employee’s full name, address, and Social Security number

  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.

  8. Gross Income • The total amount of money earned during a pay period before deductions • For hourly workers, 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. Gross Income Examples 1) Bart makes $8.50 per hour at Shop-Rite. He worked 60 hours in this pay period. What was his gross income for this pay period? 2) Maggie makes $50,000 per year. She gets paid twice monthly. What is her gross income per paycheck?

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

  11. Deductions • Deductions • The amount of money subtracted from gross pay for mandatory taxes, medical benefits, and/or retirement benefits.

  12. 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 (we will look at examples in the upcoming slides) • 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.

  13. Federal Withholding Tax • Federal Withholding Tax • The percentage deducted from an individual’s paycheck to assist in funding the federal government • The percentage deducted depends on the amount of gross pay earned.

  14. Where do my federal taxes go?? http://www.consumerismcommentary.com/our-tax-receipt/

  15. State Withholding Tax • State Withholding Tax • 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

  16. Where do my State taxes go??

  17. Where do my LOCAL taxes go?? • Local taxes are not deducted from income. • They are mostly collected as property tax.

  18. FICA (Federal Insurance Contribution Act) • FICA • This tax includes two separate taxes: Social Security and Medicare

  19. 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.

  20. 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

  21. Medical Benefits • Medical benefits usually include medical insurance, life insurance, dental insurance, disability insurance, and sometimes other things. • The company helps pay the employee’s insurance premiums as a benefit for working there.

  22. Retirement Plan (401K) • The amount an employee contributes each pay period to a retirement plan. • May be a 401K, a state, or local retirement plan. • The employer may match the employee’s contribution.

  23. 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 (i.e. total so far this year).

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