Aim: How can we understand how gross income becomes net income by analyzing our paycheck deductions? Do Now: Name and describe the three ways an employer can provide an employee with their pay?

Reading a Paycheck Why is your paycheck lower than you thought? Gross Income Net Income

What gets taken out? Deductions from your paycheck are also called “withholdings,” and they fall into different categories. Typically about 30% of your paycheck! Common categories of deductions include: Federal income tax State income tax Local income or wage tax (when applicable) Social Security and Medicare (AKA FICA) Optional Deductions Retirement plans Health insurance and other insurance

Aim: How can we understand how gross income becomes net income by analyzing our paycheck deductions? Do Now: Explain the difference between a salary and a pay rate (wage). Which would you prefer and why?

Personal Information Personal Information States the employee’s full name, address, and social security number Always check to ensure this information is correct

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

Gross Pay Gross Pay Net Pay The total amount of money earned during a pay period before deductions Net Pay The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

Federal Withholding Tax The amount required by law for employers to withhold from earned wages to pay taxes The amount of money deducted depends on the amount earned and information provided on the W-4 Form Largest deduction withheld from an employee’s gross income

Do Now: What are optional deductions? Which are mandatory? Aim: How can we understand how gross income becomes net income by analyzing our paycheck deductions? Do Now: What are optional deductions? Which are mandatory?

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

FICA (Federal Insurance Contribution Act) There are two parts of FICA and they may be listed separately: Social Security aka OASDI: This is short for Old-Age, Survivors, and Disability Insurance (6.2 %) Medicare: Which provides health insurance after you retire (1.45%)

Other Possible Deductions Medical Occurs when the employer has a medical plan for employees but does not pay full coverage for his/her benefits Retirement Plan - The amount an employee contributes each pay period to a retirement plan May be a 401K, a state, or personal retirement plan

Other Terms Current YTD (Year-to-date) Total of all of the earnings and deductions which have been withheld from an individual’s during this pay period. YTD (Year-to-date) Total of all of the earnings and 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