1. How Much Are You Really Making? "Certain materials are included under the fair use exemption of the U.S. Copyright Law and have been prepared according to the multimedia fair use guidelines and are restricted from further use." Jeanne Dompierre, Michelle Haugan, Leah Lencowski ECOMP 5007 October 10, 2004 NEXT This presentation will help you to understand the difference between gross and net pay accurately calculate gross pay required deductions and net pay

2. Materials Needed Pencil Scratch Paper Calculator One CLEAN sheet of paper that will be turned into your teacher at the end of the presentation NEXT

3. How Much Money Do You Actually Take Home When you Work? Calculating Gross and Net Pay NEXT

4. To earn money, you first need to: GET A JOB and AGREE TO A WAGE! WAGE: The amount of money you will be paid for working. NEXT

5. WAGES can be paid: NEXT HOURLY SALARIED An agreed upon rate per hour. OVERTIME – after 40 hours, one and one-half times the regular pay. An agreed upon rate, usually not paid for overtime. Expected to work a 40-hour standard work week. More if necessary without extra pay.

6. WAGES can be paid: Per Hour – Hourly Rate Per Week – Weekly Rate Per Month – Monthly Rate Bi-Monthly – 2 x per Month Bi-weekly – Every 2 weeks Per Year – Yearly Rate NEXT HOURLY SALARIED

7. Johnny Gets Paid an Hourly Rate of $10.00 Johnny earns 10.00 Each hour he is at work NEXT

8. How Much Does Johnny Earn if he works for 5 hours? 10.00 HOURS X HOURLY RATE NEXT

9. Johnny Earns $50.00 10.00 5 X $10.00 = $50.00 HOURS X HOURLY RATE NEXT

10. Johnny’s GROSS PAY is $50.00 GROSS PAY is: Total money earned for time worked. NEXT

11. Stressed-out Susie earns $5.00 per hour What is Susie’s Gross Pay if she works for 7 hours? I think I know, Check my Answer Show me how to determine Susie’s Gross Pay I think I know, Check my Answer

12. Susie’s Gross Pay is: $35.00 Oops, I guess I need help. Click here. Click Here if your answer was correct.

13. Susie Earned $35.00 5.00 7 X $5.00 = $35.00 HOURS X HOURLY RATE NEXT

14. Diligent David earns $8.00 per hour delivering the mail What is David’s Gross Pay if he works for 46 hours? I think I know, Check my Answer Show me how to determine David’s Gross Pay

15. David’s Gross Pay is $392.00 Click here is your answer was correct. Oops, I guess I need help. Click here.

16. David Earned $392.00 8.0012.00 $320.00 40 HRS 6 HRS. X X = NEXT = $ 72.00 OVERTIME RATE = REGULAR RATE X 1.5 $8.00 x 1.5 = $12.00 GROSS PAY $392.00

17. What if Diligent David is a salaried employee and his gross pay is $30,000 annually. What is David’s Gross Pay if he is paid weekly? I think I know, Check my Answer Show me how to determine David’s Gross Pay

18. David’s Weekly Gross Pay is $576.92 Click here is your answer was correct. Oops, I guess I need help. Click here.

19. David Earned $576.92 weekly $576.92 = NEXT $30,000 ÷ 52 weeks

20. What if Diligent David is a salaried employee and his gross pay is $30,000 annually. What is David’s Gross Pay if he is paid monthly? I think I know, Check my Answer Show me how to determine David’s Gross Pay

21. David’s Monthly Gross Pay is $2500 Click here is your answer was correct. Oops, I guess I need help. Click here.

22. David Earned $2500.00 monthly $2500.00 = NEXT $30,000 ÷ 12 months

23. What if Diligent David is a salaried employee and his gross pay is $30,000 annually. What is David’s Gross Pay if he is paid Bi-monthly? I think I know, Check my Answer Show me how to determine David’s Gross Pay

24. David’s Bi-Monthly Gross Pay is $1250.00 Click here is your answer was correct. Oops, I guess I need help. Click here.

25. David Earned $1250.00 monthly $1250.00 = NEXT $30,000 ÷ 24 (12 months x 2)

26. What if Diligent David is a salaried employee and his gross pay is $30,000 annually. What is David’s Gross Pay if he is paid Bi-weekly? I think I know, Check my Answer Show me how to determine David’s Gross Pay

27. David’s Bi-Weekly Gross Pay is $1153.85 Click here is your answer was correct. Oops, I guess I need help. Click here.

28. David Earned $1153.85 monthly $1153.85 = NEXT $30,000 ÷ 26 (52 weeks ÷ 2)

29. Try calculating gross pay on your own NEXT Complete Activity One Now

30. I thought I could keep my Gross Pay! Now I know why it is called GROSS! NEXT

31. What are two sure things in life? NEXT Death and Taxes

32. Income Taxes – money paid to the government on any income you receive. NEXT Payroll Taxes – money taken from employee paychecks and given to government for income tax. Based on employee earnings. Paying income taxes as you earn. (Tax Freedom Day) Ideal Situation, The money owed for income taxes will equal the amount taken out pay for payroll taxes.

33. REQUIRED DEDUCTIONS Money subtracted from your gross pay for taxes by the government, also called payroll taxes: Federal Taxes State Taxes FICA (Social Security and Medicare) NEXT

34. REQUIRED DEDUCTIONS FEDERAL TAXES The amount subtracted from gross pay for taxes is determined by the federal government and you through your allowances, W4. It is a percentage of gross pay based on a person’s total wages and living situation (married, single, children, etc.). The federal tax deduction is calculated referring to the appropriate tax table or by multiplying the government determined federal tax rate (from tax table) by gross pay. NEXT

35. What is a W4? Form that employers have you complete when you start a job, directs them how much to withhold, take out, of your paycheck for taxes. ALLOWANCE – number that reduces the amount of money withheld from your pay. The more allowances you claim, the smaller the amount withheld. You may complete a new W4 anytime. LET’S COMPLETE A W4! NEXT

36. Calculating Federal Tax Deduction Gross Pay x Federal Tax Rate = Federal Tax Deduction Johnny’s Gross Pay is $50.00 Johnny’s Federal Tax Rate is 20% Johnny’s Federal Tax Deduction is $10.00 $50.00 x 20% = $10.00 $50.00 x.20 = $10.00 NEXT

37. Stressed-out Susie’s Gross Pay is: $35.00 Show me how to determine Susie’s Federal Tax Deduction I think I know, check my answer How many dollars are subtracted from her gross pay for federal taxes if the federal tax rate is 20%?

38. Susie’s Federal Tax Deduction is $7.00 Taxes are collected to pay for public services such as roads, parks, etc. Oops, I guess I need help. Click here. Click here is your answer was correct. That’s a lot of cash going to Uncle Sam!

39. Susie’s Federal Tax Deduction is $7.00 Gross Pay x Federal Tax Rate = Federal Tax Deduction $35.00 x 20% = $7.00 $35.00 x.20 = $7.00 NEXT

40. Diligent David’s Gross Pay is $48.00 I think I know, check my answer Show me how to determine David’s federal tax deduction The Federal Tax Rate is 20% What is David’s Federal Tax Deduction?

41. David’s Federal Tax Deduction is $9.60 Click here is your answer was correct. Oops, I guess I need help. Click here.

42. 20% or.20 means 20¢ out of every dollar earned, goes to Uncle Sam. There additional deductions to be subtracted from gross pay, let’s calculate State Taxes and FICA… 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢ } $9.60 NEXT

43. REQUIRED DEDUCTIONS STATE TAXES The amount subtracted from gross pay for taxes is determined by the state government. It is a percentage of gross pay based on a person’s total wages and living situation (married, single, children, etc.). The state tax deduction is calculated by multiplying the government determined tax rate by gross pay. NEXT

44. Calculating State Tax Deduction Gross Pay x State Tax Rate = State Tax Deduction Johnny’s Gross Pay is $50.00 Johnny’s State Tax Rate is 15% Johnny’s State Tax Deduction is $7.50 $50.00 x 15% = $7.50 $50.00 x.15 = $7.50 NEXT

45. Diligent David’s Gross Pay is $48.00 I think I know, check my answer Show me how to determine David’s state tax deduction The State Tax Rate is 18% What is David’s State Tax Deduction?

46. David’s State Tax Deduction is $8.64 Click here is your answer was correct. Oops, I guess I need help. Click here.

47. There is one more deduction to be subtracted from gross pay, let’s learn about FICA… 18% or.18 means 18¢ out of every dollar earned, goes to Uncle Sam. } $8.64 NEXT $48.00 x 18% OR $48.00 x.18

48. REQUIRED DEDUCTIONS FICA FICA stands for Federal Insurance Contributions Act. This law was created to pay for Social Security and Medicare. Social Security – Wages paid to retired people by the government based on how much they earned during their working years. Medicare – Government sponsored health insurance for retired people. NEXT The amount subtracted from gross pay for FICA is always at a rate of 7.65% (6.2% for Social Security and 1.45% for Medicare)

49. Calculating FICA Deduction Gross Pay x FICA Percentage = FICA Deduction Johnny’s Gross Pay is $50.00 The FICA Rate is 7.65% Johnny’s FICA Deduction is $3.83 $50.00 x 7.65% = $3.83 $50.00 x.0765 = $3.83 NEXT

50. Stressed-out Susie’s Gross Pay is: $35.00 Show me how to determine Susie’s FICA Deduction I think I know, check my answer How many dollars are subtracted from her gross pay for FICA?

51. Susie’s FICA Deduction is $2.68 Why should I pay for old people? Someday you will be old too! Click here is your answer was correct. Oops, I guess I need help. Click here.

52. Susie’s FICA Deduction is $2.68 Gross Pay x FICA Percentage = FICA Deduction $35.00 x 7.65% = $2.68 $35.00 x.0765 = $2.68 NEXT

53. Diligent David’s Gross Pay is $48.00 I think I know, check my answer Show me how to determine David’s FICA deduction What is David’s FICA Deduction?

54. David’s FICA Deduction is $3.67 After all these deductions, is there any money left for me? Oops, I guess I need help. Click here. Click here is your answer was correct.

55. $48.00 x 7.65% = $3.67 $48.00 x.0765 = $3.67 NEXT

56. After all these deductions, is there any money left for me? NET PAY, the money left after all deductions are subtracted from gross pay. NEXT

57. Gross Pay - Federal, State and FICA Deductions = Net Pay Johnny’s Gross Pay is $50.00 Johnny’s Federal Tax Deduction is $10.00 Johnny’s State Tax Deduction is $7.50 Johnny’s FICA Deduction is $3.83 $50.00 - $10.00 - $7.50 - $3.83 = $28.67 Calculating Net Pay – the money after deductions, what you actually bring home….. NEXT

58. Her Gross Pay is $35.00 Her Federal Tax Deduction is $7.00 Her State Tax Deduction is $4.20 Her FICA Deduction is $2.68 How much does Stressed-out Susie actually bring home? I think I know,know check my answer Show me how to determine Susie’s Net PayNet

59. Susie will bring home $21.12 Click here is your answer was correct. Oops, I guess I need help. ClickClick here.

60. $35.00 - $7.00 - $4.20 - $2.68 = $21.12 Gross Pay - Federal, State and FICA Deductions = Net Pay Susie will bring home $21.12 NEXT

61. What is Diligent David’s Net Pay? I think I know, check my answer Show me how to determine David’s Net Pay His Gross Pay is $48.00 His Federal Tax Deduction is $9.60 His State Tax Deduction is $8.64 His FICA Deduction is $3.67

62. David’s Net Pay is $26.09 He will have $26.09 to spend after all required deductions have been subtracted from his gross pay. Oops, I guess I need help. Click here. Click here is your answer was correct.

63. David’s Gross Pay is $48.00 $8.00 x 6 hours = $48.00 His Federal Tax Deduction is $9.60 $48.00 x 20% = $9.60 His State Tax Deduction is $8.64 $48.00 x 18% = $8.64 His FICA Deduction is $3.67 $ 48.00 x 7.65% = $3.67 David’s Net Pay NEXT

64. David’s Net Pay = $26.09 $48.00 - $9.60 - $8.64 - $3.67 = $26.09 Gross Pay - Federal Tax - State Tax - FICA = Net Pay NEXT

65. Review Computer Whiz Carl works at Circuit City. I think I know, check my answer Show me how to determine Carl’s Net Pay Carl worked 12 hours for an hourly rate of $7.50 The Federal Tax Rate is 20% The State Tax Rate is 10% FICA is always 7.65% What is Carl’s Net Pay?

66. Carl’s Net Pay is $56.11 Click here is your answer was correct. Oops, I guess I need help. Click here.

67. Carl’s Gross Pay is $90.00 $7.5 x 12 hours = $90.00 His Federal Tax Deduction is $18.00 $90.00 x 20% = $18.00 His State Tax Deduction is $9.00 $90.00 x 10% = $9.00 His FICA Deduction is $6.89 $ 90.00 x 7.65% = $6.89 Carl’s Net Pay $90.00 - $18.00 - $9.00 - $6.89 = $56.11 Carl’s Net Pay is $56.11 NEXT

68. OTHER DEDUCTIONS Health Insurance Union Dues 401(K) (often pre-tax) Others? PRE-TAX DEDUCTION – deduction is subtracted from gross pay before required tax deductions are taken. (Lowers your income to be taxed, or taxable income)

69. FINAL REVIEW Please show all your work on a piece of paper and hand in to your teacher when done. Don’t forget your name! Angie the Accountant worked 32 hours for an hourly rate of $18.25 The Federal Tax Rate is 18% The State Tax Rate is 15% She also has $4.00 per week taken out for 401(k) and $2.00/wk for health ins. How much money does Angie actually take home? (her net pay)