1. Chapter 8
Income and Taxes

2. Examining Pay and Benefits
Section 8.1
Examining Pay and Benefits
Objectives
Distinguish between types of income
Explain regulations affecting pay
Give examples of benefits
Describe employment classifications and their effect on pay and benefits

3. Types of Pay
Salary – is a set amount of money earned by an employee per year or other fixed length of time
Wages – are employee earnings that are paid by the hour, day, or item
Piecework – work for which wages are based on the number of items or pieces produced
Commission – is a fixed percentage or amount of profit given to an employee in exchange in addition to regular pay
Bonus – is a sum of money paid to an employee in addition to regular pay
Tip – is money given to an employee by customers in exchange for a service

4. Regulation Affecting Pay
Fair Labor Standard Act (FLSA) – federal government developed standards governing employee payment and compensation

5. Equal Pay – forbids employers from paying one person less than another person for the same work
Discrimination against women, minorities, and older workers
Minimum Wage – this is the lowest hourly rate an employer may legally pay most workers
This is raised periodically to help workers keep up with inflation

6. Subminimum Wage – is set lower than the standard minimum wage
Full-time students, employees who are younger than 20, and employees who are developmentally disabled
Overtime – employees that work in excess of 40 hours per week
Most cases must be at least 1.5 time the employee’s regular rate of pay
Salaried employees are not paid overtime

7. Types of Benefits
Insurance
Savings & Retirement
Other
Holidays
Vacation
Sick leave
Job training
Maternity leave

8. Employment Classifications
Full-time – hold wages or salary jobs of at least 35 hours per week
Part-time – work fewer than 35 hours per week
Temporary – short-term assignments at various companies
Contract – are hired for a specified period of time to complete a particular project for an employer

9. By Using Temporary or Contract Employees, Employers Gain Several Advantages:
Can easily increase or decrease staffing as their needs change
Cost may be less if benefits are not paid
Avoid costly hiring and training procedures

10. Understanding Your Paycheck
Chapter 8.2
Understanding Your Paycheck
Objectives
Explain variations in how workers receive pay
Describe the information found on a pay stub
Identify paycheck deductions and their purposes

11. How Employees Are Paid
Weekly
Every two weeks
Monthly
Twice a month
Direct Deposit – pay is electronically transferred directly into the recipient’s bank account by completing and signing a form

12. Earnings
Number of hours (regular and overtime) – very important to someone who gets hourly pay
Gross Pay – is the total amount of money earned for working during a pay period.
Salary – usually does not change
Hourly – Multiply the number of hours worked by the hourly rate

13. Deductions – is anything that is subtracted from gross pay
Types
Tax Withholding
Federal, State, and Local Income Taxes.
Social Security, Medicare deductions (FICA – Federal Insurance Contribution Act)
Benefits
Medical, Dental, & Vision
Other Deductions
Savings & Retirement Plan

14. Totals and Net Pay
Net Pay – is the amount of pay an employee is left with after taxes and other deductions are subtracted from the gross pay. (Take-home-pay)
Multiply the figures for gross and net pay by the number of pay periods during the year

15. Chapter 8.3
Paying Income Taxes
Objectives
Identify responsibilities related to income taxes
Describe the purpose of various income tax forms
Explain the types of information included on a tax return
Discuss the benefits of tax planning

16. Income Tax Responsibilities
– 2 main tasks
Complete a form that allows your employer to withhold income taxes from your pay
File a tax return at least once a year, and pay any additional tax owed

17. Income Tax Withholding
Form W-4 – Employee’s Withholding Allowance Certificate
Personal Information
Name, address, social security number, & single or married
Exempt Status
Allowances – are factors that affect the amount of income tax withholding
The more allowances you claim, the less tax your employer will take out

18. Getting Ready for Tax Time
April 15th – “Income Tax Day” – deadline by which most people need to file a tax return
If you withhold more than you need to pay, then you will receive a “Refund”
If you have less withheld, then you will need to pay the difference

19. Internal Revenue Service (IRS) – government agency in charge of collecting federal income tax
Do You Need to File?
People Who Need Not to File a Tax Return
Some incomes that falls below a certain amount
Self-employed, over the age of 65, single adult, a child, or a married person with children

20. What Materials Do You need?
Form W-2 – Employer will send to you total earnings for the year by January 31st (You check for errors)
Form 1099 – Interest earned on savings during the year, sent by the bank
IRS Instruction booklets and forms – Form 1040, 1040A, or 1040EZ (Teens or people who make small amounts of incomes)
Personal Records

21. Completing Your Tax Return
Filing Status – Married or Single
Exemptions – Number of people in the household
Dependent – is someone who is supported
by a taxpayer’s income.

22. Income – all sources
Deductions
Tax deductions – reduces the amount of income that is taxed
Itemized deduction – amounts actually spent on tax-deductible expenses during the year
Standard deduction – a set amount that the IRS allows without listing any actual expenses

23. Taxable Income – The portion of your income that is actually subject to income tax
Tax owed
Tax Credit – is subtracted directly from the amount of tax owed
Final Calculations

24. Electronic Filing – on the IRS website.
The Benefits of Tax Planning
Investing money
Charities