The Taxes You Pay. 1. Payroll Taxes -taxes based on the payroll of a business upon employee total earnings Paid to the govt. by you and your employer.

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Presentation transcript:

The Taxes You Pay

1. Payroll Taxes -taxes based on the payroll of a business upon employee total earnings Paid to the govt. by you and your employer Paid to the govt. by you and your employer Ex. Social insurance taxes 2. Income Taxes - $ you pay on most types of income you receive Income taxes vary according to individual’s financial and family situation. Income taxes vary according to individual’s financial and family situation. You are responsible for calculating the taxes that you owe. You are responsible for calculating the taxes that you owe. The Federal Government receives the largest part of its income from

Tax Liability – amount of $ you are responsible to pay Tax Liability – amount of $ you are responsible to pay Income – deductions = taxable income Income – deductions = taxable income Tax liability is calculated according to taxable income (table) Tax liability is calculated according to taxable income (table)

(Federal Insurance Contributions Act) (Federal Insurance Contributions Act) FICA is the law that requires workers to contribute to S.S. and Medicare FICA is the law that requires workers to contribute to S.S. and Medicare Taken as a portion of income taxes Taken as a portion of income taxes Current Rate: 7.65% Current Rate: 7.65% 6.2% for S.S. 6.2% for S.S. 1.45% for Medicare 1.45% for Medicare FICA – Social Security & Medicare

Gross Income – the amount you earn before taxes are withheld Gross Income – the amount you earn before taxes are withheld Net income – the amount you receive after withholdings (the $ paid in taxes) are subtracted from gross pay Net income – the amount you receive after withholdings (the $ paid in taxes) are subtracted from gross pay (Net income = take-home pay) Paystub breaks down amount paid for each tax (Federal Income, SS, Local, and State) Paystub breaks down amount paid for each tax (Federal Income, SS, Local, and State) On Your Paystub:

Mandatory Deductions Mandatory Deductions Federal Income Tax (varies) Federal Income Tax (varies) S.S. Tax (6.2%) S.S. Tax (6.2%) Medicare Tax (1.45%) Medicare Tax (1.45%) State Tax (PA – 3.07%) State Tax (PA – 3.07%) Unemployment Tax (FUTA and SUTA - < 1%) Unemployment Tax (FUTA and SUTA - < 1%) Local Tax (1-2%) Local Tax (1-2%) Occupational private tax (<1%) Occupational private tax (<1%) Deductions ($ taken from gross pay)

Optional Deductions Optional Deductions Union dues Union dues Retirement Retirement Alimony Alimony Savings club Savings club Deductions

Who collects the taxes? Who collects the taxes? ______ ______ _______