1. CHAPTER 2 Income, Benefits, and Taxes
2-1 Earned Income and Benefits
2-2 Unearned Income and Payments
2-3 Taxes and Other Deductions

2. 2-1 Earned Income and Benefits
Learning Objectives List and discuss types of earned income, such as wages, salaries, tips, and commissions Describe employee benefits and their role in employee compensation.
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3. What Are Sources of Earned Income?
Wages
Minimum wage: The lowest pay rate allowed by law for each regular hour of work
Overtime pay: Pay received for hours worked in addition to regular hours
Salaries
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4. What Are Sources of Earned Income? (continued)
Tips and Commissions
Commission: A set fee or percentage of a sale paid to an employee instead of or in addition to salary or wages
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5. What Are Employee Benefits?
Forms of compensation in addition to salary or wages
Disposable income
Money available to spend or save after taxes have been paid
Pay Without Work
Sick leave: Paid time away from work due to illness
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6. What Are Employee Benefits? (continued)
Pay Without Work (continued)
Personal leave: Paid time away from work for personal reasons
Insurance
Health Spending Accounts
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7. What Are Employee Benefits? (continued)
Retirement Plans
Retirement plan: An account into which employees voluntarily contribute a portion of their earnings for their retirement; employers may match these contributions
Incentives
Profit sharing: A benefit that allows employees to share a portion of the business’s profits
Perks
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8. 2-2 Unearned Income and Payments
Learning Objectives
2-2.1 Name private and governmental sources of unearned income.
2-2.2 List the types of taxes levied against individuals.
2-2.3 Discuss the benefits of paying taxes, both direct and indirect.
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9. What Is Unearned Income?
Money received from sources other than working
Private Sources
Interest: Money earned on savings accounts and other funds
Dividends: A portion of a corporation’s profits distributed to stockholders
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10. What Is Unearned Income? (continued)
Government Transfer Payments
Transfer payments: Money and benefits received from local, state, or federal governments
In-cash payments: Money in the form of a check, a debit card, or other direct payment given to a person needing assistance
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11. Types of Income
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12. What Is Unearned Income? (continued)
Government Transfer Payments (continued)
In-kind payments: Payments made indirectly on a person’s behalf or paid in a form other than money
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13. Transfer Payments
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14. What Types of Taxes Do You Pay?
Taxes Based on Consumption
Sales tax: A tax levied as a percentage of the purchase price of goods and services sold to consumers
Use tax: A tax charged on the use, storage, or consumption of a good that was purchased in one state but used in another state
Excise tax: Tax charged on the purchase of specific goods and services
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15. What Types of Taxes Do You Pay? (continued)
Taxes Based on Income
Taxes Based on Wealth
Property tax: A wealth tax based on the assessed value of owned real estate
Estate and Gift Taxes
Other Taxes
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16. Partial List of U.S. Taxes
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17. How Do You Benefit from Paying Taxes?
Direct Benefits
Public goods: Government-provided goods and services paid for by taxes
Indirect Benefits
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18. 2-3 Taxes and Other Deductions
Learning Objectives List the mandatory and voluntary deductions from gross pay Explain how to prepare an income tax return.
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19. What Are Paycheck Deductions?
Gross pay
Total salary or wages earned during a pay period
Net pay
The amount of your paycheck after deductions
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20. Paycheck Stub
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21. What Are Paycheck Deductions? (continued)
Required Deductions
Income Tax Withholding
Exemption: A person claimed as a dependent on a tax return
Dependent: A person who depends on you for more than half of his or her support
Social Security Tax: A withholding tax that pays for Old-Age, Survivors, and Disability Insurance (OASDI) benefits
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22. What Are Paycheck Deductions? (continued)
Required Deductions (continued)
Medicare tax: A tax that pays for medical care for retired persons age 65 and older who receive Social Security benefits
Workers’ Compensation Insurance
Workers’ compensation: An insurance plan that pays medical and disability benefits to employees injured on the job
Optional Deductions
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23. Sample Form W-4
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24. Sample Form I-9
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25. How Do You Prepare an Income Tax Return?
Form W-2: A form used to report taxable income that a worker received during the calendar year
Form 1040EZ: The short tax return form designed for single and joint filers with no dependents or itemized deductions
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26. Sample Form W-2
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27. Sample Form 1040EZ
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28. How Do You Prepare an Income Tax Return? (continued)
Other Tax Forms
E-Filing
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29. Sample Form 1099-INT
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