Presentation on theme: "Consumer Math Class East Jackson High School 2015"— Presentation transcript:
1 Consumer Math Class East Jackson High School 2015 Tax Unit: Module 1Consumer Math ClassEast Jackson High School2015
2 Module 1: Payroll Taxes and Federal Income Tax Withholding IntroductionPayroll taxes include the Social Security tax and the Medicare tax.The Medicare tax is used to provide medical benefits for certain individuals when they reach age 65.Federal income taxes are used to provide for national programs.
4 Social Security TaxThe Social Security tax is also called the FICA (Federal Insurance Contributions Act) tax.Social Security taxes provide the following:Retirement benefitsBenefits for the dependents of retired workersBenefits for the disabled and their dependents
5 Medicare TaxProvides medical benefits for certain individuals when they reach 65.Individuals eligible:workersretired workersspouses of workers and retired workers
6 Federal income taxes finance: National defense, veterans, and foreign affairsSocial programsPhysical, human, and community developmentLaw enforcementInterest on the national debt
7 Gross Pay and Net Pay Gross pay = the total amount an employee earns Net pay (Take-home pay) = amount the employee receives after money has been withheld for:Social Security taxesMedicare taxesIncome tax (Federal, State, and/or City)Other withholdingsEmployers send the withheld taxes to the taxing authorities.
8 Payroll Taxes 2014 Payroll Tax Rates Social Security tax rate 6.20% Medicare tax rate %Total payroll taxes %There is a maximum annual amount of Social Security tax withheld per employee. Social Security taxes are not withheld on amounts over the earnings limit. For 2014, the earnings limit was $117,000, and the maximum Social Security tax was $7,254 ($117,000 x 6.2%). There is no limit on the amount of wages subject to Medicare tax.
9 Form W-4Employees complete Form W-4, Employee’s Withholding Allowance Certificate.Employers use Form W-4 to determine how much federal income tax to withhold.
10 Withholdings depend on: The employee’s marital statusThe number of withholding allowances claimed by the employee.The more allowances, the less $ withheld.Any additional amount the employee wants to withholdAny exemptions from withholding that the employee claims.
12 ExampleAngela Viviano earns $2,000 a month as a physical therapist’s assistant. Angela’s net pay is calculated as follows:Gross Pay $2,000Social Security (6.2%) -$124Medicare (1.45%) -$29Income Tax (per W-4) -$237Retirement -$50Net Pay $1,576Her employer sends $390 ($124 + $29 + $237) to the federal government and $50 to the retirement fund.
13 Quick Check! ____1. Which tax provides for medical benefits? a. FICA taxb. Federal income taxc. Social Security taxd. Medicare tax____2. How much income tax do employers withhold from employee pay?a. 6.2% of gross payb % of gross payc % of gross payd. Employers use the information on Form W-4to compute income tax withholding.____3. Net paya. is more than gross pay.b. is also known as take-home pay.c. is gross pay minus 7.65%d. depends on how much the employee wants to pay in Social Securitytaxes.
14 Ahmed Khan b 3 50 Who completed Form W-4? _______________ ____2. Is the taxpayer married or single?a. Marriedb. Singlec. Divorcedd. WidowedHow many allowances does the taxpayer claim? _____How much additional tax does the taxpayer want to be withheld? _________b350
15 Review Questions____1. Employees decide when to pay their payroll taxes.a. Trueb. False____2. Federal income taxes are used to pay the interest on the national debt.____3. In 2014, the Medicare tax rate was 1.45% of gross pay.____4. Employees use Form W-4 to prove that they are eligible to work in the United States.
16 Simulation for Module 1 Learn how to complete a Form W-4 Your name is Lawrence Red Owl.You have just recently graduated from college with a marketing degree.On the 1st of next month you will start your new job as manager of a clothing store in a mall.You will get a weekly salary plus a bonus based on the store’s sales.
17 Use the following information to fill out the Form W-4 given in your packet. Marital Status: SingleChildren: NoneU.S. citizen: YesDependents other than above: NoneSocial Security Number:Address:5022 Oak Tree Dr.Anytown, US 00001