In your notebook…  Imagine you have taken a job at the mall earning $9.00 per hour. Over the course of two weeks you work a total of 20 hours. Estimate.

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Presentation transcript:

In your notebook…  Imagine you have taken a job at the mall earning $9.00 per hour. Over the course of two weeks you work a total of 20 hours. Estimate your paycheck for the two weeks of work.

Learning Goals  Differentiate gross pay from net pay.  Explain the various elements of a paystub.  Explain the short-term and long-term consequences of making changes to paycheck deductions.

Know Your Dough!

Gross Pay  Number of hours worked x hourly wage  Annual salary ÷ number of paychecks  26 paychecks if paid every 2 weeks

Net Pay  Gross pay – deductions  Dollar amount on actual check

Mandatory Deductions  Income taxes  Federal  Possibly state and local  Amount deducted determined using W-4 Form  Actual amount of taxes owed may differ from taxes deducted  Use W-2 to file tax returns annually with the Internal Revenue Service (IRS)

If you filled this out now, what would you enter on line 5?

Mandatory Deductions  Federal Insurance Contributions Act (FICA) taxes  Social Security – Employees pay 6.2% on the first $117,000 of income  Medicare – Most employees pay 1.45%

Optional Deductions BEFORE TAX AFTER TAX  Health insurance  Retirement savings plans such as – 401(k), 403(b), etc.  These reduce taxable income  Life insurance, pet insurance, etc.  Regular savings account  Charitable donations

Practice & Application  Data entered into W-4 forms and decisions related to optional deductions impact individuals in the short run and the long run  With your partner…  Study the sample paystub and respond to the accompanying questions