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With pay and benefits comes Taxes

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Presentation on theme: "With pay and benefits comes Taxes"— Presentation transcript:

1 With pay and benefits comes Taxes

2 Types of Pay Salary: set amount of money earned by an employee per year or fixed length of time. What are the advantages or disadvantages of a set salary?

3 Types of Pay Wages : employee earning that are paid by the hour, day or item. Piecework: wages based on the number of items or pieces produced. Commission: a fixed percent or amount given to employees In exchange for making a sale.

4 Types of Pay Some employees earn a commission plus a salary
Others work of straight commission. What are the advantages or disadvantages? Tips: money earned in exchange for a service

5 Equal Pay Fair Labor Standards Act
Includes equal pay provisions that forbids employers from paying one person less for the same work.

6 Equal Pay Minimum wage: the lowest hourly rate an employer may legally pay most workers. Are Federal and State different in Illinois? Should the minimum wage be raised? Does a city have a right to tell a company how much you should pay employees?

7 Equal Pay Overtime: in excess of 40 hours per week overtime is usually paid at the rate of 1.5 times the employees regular rate Overtime may be paid for anything over 8 hours Salaried employees may be exempt

8 Types of Benefits Insurance benefits: health care plans which may be paid for or available at a reduced cost Health care is coverage for employees is seen as a problem for some employers. Why?

9 Types of Benefits Savings and retirement plans: taxable or pre-taxed savings plans, retirement plans, employer contribution or matching plans Vested: allows an employee to be entitled to part of or all of their money in a retirement plan. Ex: vested 20% per year

10 Types of Benefits Other benefits: paid holidays, vacation, or sick time

11 Employment Classifications
Full-time: works hour of at least 35 hours per week. Usually can take part in employee sponsored benefit plans. Part-time: employees who work less than 35 hours per week

12 Employment Classifications
Temporary: employees hired to fill short term assignments or additional work. Employees are usually paid by the temp agency and not the business Contract: employees hired for a specified period of time to complete a project. Paid by the company. May or may not have benefits

13 Employment Classifications
Advantages of using temp or contract employees are: 1. change staff as needs change 2. May cost less in benefits, and training 3. Can be used as a trial period before hiring for permanent position

14 Your Paycheck Many companies pay every week, every two weeks or even twice a month. Some use Direct deposit: an electronic transfer of funds directly into your account Employees will receive a pay stub providing all payroll information

15 Your Paycheck Pay stub provides useful information and helps keep track of your earnings. Look at page 197 Why should you go over your pay stub carefully each time you are paid?

16 Your Paycheck Gross pay: is the total amount of money earned for working a pay period before deductions. Deduction: anything that is subtracted from gross pay. Can include taxes, benefits, or retirement with holdings

17 Your Paycheck Tax withholdings: can include federal, state, or local taxes. It may also include Social security: a federal assistance program that pays retirement, survivor, and disability benefits Medicare: federal program that helps pay medical expense for those who qualify

18 Your Paycheck Social security and Medicare deductions sometimes use the abbreviation FICA-Federal Insurance Contributions Act If you remember what FICA means you will be only one of a few to know

19 Your Paycheck Net pay: the amount of pay an employee is left with after taxes and other deductions are subtracted from the gross pay Also known as “take home pay”

20 Income Tax Income tax responsibility according to the IRS
1. Complete a W-4 form that allows an employer to withhold income tax from your pay. 2. File a tax return at least once a year, and pay any additional tax owed

21 Income Tax W-4 Form-provides employer with your personal information, exempt status, and allowances Page 201 Exempt status-do not have to pay taxes if you expect to make too little income during the year Allowances: factors that affect the amount of income tax withholding. The more withholding , the less tax.

22 Income Tax IRS-Internal Revenue Service: a governmental agency in charge of collecting taxes. Taxes must be file by April 15th of the following year. You will need the following items before you file

23 Income Tax W-2 Form: an employer sends you this form showing your total earnings, and total taxes deducted for the year 1099-INT: a form showing your earned interest income for the year in a savings account.

24 Income Tax You may also need IRS booklets and personal and financial records. Filing status: is based on whether you are married or single. It does affect the amount of taxes owed. Exemptions: tax laws allow some income to be excused from taxes based on the number of qualified exemptions

25 Income Tax Dependent: someone who is supported by a taxpayer’s income.
Adjusted gross income: Income that has been subtracted from total (gross) income Tax deduction: reduces the amount of income that is taxed

26 Income Tax Two ways to take tax deductions
1. Itemized deductions: amount actually spent on tax-deductible expenses Ex: Charity, church, mortgage interest Why would the government allow you to deduct the interest on your home loan?

27 Income Tax 2. Standard deduction: set amount the IRS allows without listing expenses or having receipts Taxable income: the portion of your income that is actually subject to tax Tax credit: amount subtracted from taxes owed ex: education, child care

28 Electronic Filing Consider filing electronically through the IRS website Your money is usually returned much quicker

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