1. Chapter 2 Net Pay

2. 2.1 Deductions from Gross Pay

3. Federal Withholding Tax Deduction
Deductions-Subtractions from gross pay
Withholding taxes-income taxes
Amount of taxes depends on:
Wages
Marital status
Number of withholding allowances claimed
Withholding allowance-used to reduce the amount of tax withheld

4. Social Security & Medicare Tax Deductions
FICA benefits include:
Disability benefits
Medicare
Retirement benefits
Survivor’s benefits
Social Security is 6.2% for first $87,900
Medicare is 1.45% for all wages
Combined FICA is 7.65% (6.2% %)

5. C. $24,000 x =
D. $87,900 x =
$89,000 x =
E. $460 x =
F. $ x =
G. $1, x =
H. $ x =

6. Total Deductions and Net Pay
Withholding Taxes
Social Security
Medicare
Other Deductions
Net Pay = Take Home Pay
Gross Pay – Deductions = Net Pay

7. $410 x =
$410 – 39 – =
J. $820 x =
$810 – 118 – – 74 – 45 =

8. 2.2 Benefits and Expenses

9. Total Job Benefits Employee benefits – Fringe benefits
What are some examples of job benefits?

10. Benefit 1 + Benefit 2 = Total Employee
Benefits
Benefit Rate x Gross Pay = Total Employee
Gross Pay = Employee = Total Job Benefits Benefits

11. A. 1. $2,580 + $3,133 + $2,545 =
2. $31,807 + $8,258 =
B. $28,089 x 0.33 =
28, , =

12. Net Job Benefits Job Expenses - Examples
Total Job – Job Expenses = Net Job
Benefits Benefits
C. $56,102 – ,077 =
D. 78, ,793-2,057 =

13. Comparing Net Job Benefits
E. Job 1 41,700 x =
41, ,552.5 =
55, – 3,180 =
Job 2 45,260 x 0.24 =
45, , =
56, – 3,740 =

14. F. Job 1 49,500 x 0.29 =
49, ,355 =
63,855 – 650-1, =
Job 2
45,200 x 0.34 =
45, ,368 =
60,568 – 2,560 – 480 – 590 – 380 =

15. 2.3 Federal Income Taxes

16. Adjusted Gross Income and Taxable Income
From 2.1 – withholding taxes taken out of paycheck every pay period
Dec 31 end of year and federal income tax returns prepared for April 15
Tax returns based on income earned and taxes due
Withholding taxes are used here

17. Gross Income – Total income in a year
Adjustments are subtracted from income. Include business losses, payment to retirement plan, alimony and certain penalties.
Adjusted Gross = Gross Income – Adjustments
Income to Income
Taxable Income – income you actually pay taxes on
Taxable = Adjusted Gross Deductions &
Income Income Exemptions

18. Deductions – Expenses that reduce the amount of your taxable income
Which is more standard deductions or itemized, use the bigger of the two.
Standard deductions:
$4,850 for individual
$9,700 for married filing jointly
Exemption is an amount of income per person that is tax free
$3,100 per person

19. AGI 65,000
- Ded 4,850
- Exe 3,100
Tax Inc
B. AGI 50,000
- Ded 10,500
- Exe 9,300

20. Income Tax Due
Get a refund if paid too many taxes – remember withholding taxes from paychecks
Pay in if didn’t pay enough taxes through the year
Use the tax tables on pg. 56

21. C. From tax table 1,679
2,340 – 1,827 = refund or pay in?
D. 2,874 from tax table
2,874 – 2,509 = refund or pay in?

22. 2.4 State and City Income Taxes

23. State and City Flat Income Tax
Flat tax is the same tax to everyone usually stated as a % of earnings
34,100 x 0.015=
29,900 x =

24. State & City Graduated Income Taxes
As your income goes up the amount of taxes you pay goes up
C. 43, ,000 =
3,600 x 0.07 =
1, =
D. 38,200 – 32,000 =
6,200 x 0.06 =
1, =

25. 2.5 Cash Receipts and Payment Records
Cash receipts records – Written records of $ received A.

26. B =

27. Columnar Cash Payments Record
Cash payments are written records of $ paid out C
47.89 =
D =

28. 2.6 Budgets

29. Expense Percentages Summarize expenses and receipts with percentages
Helps to compare past, present, and future
Can use specific categories to help with spending

30. 6,400 / 128,000 =
338,200 / 475,000 =

31. Budgeting Budgets are future spending plans C. 0.05 x 4,500,000 =
D x 5,489 =
Fixed Income
Variable Income
Fixed Expenses
Variable Expenses