Presentation on theme: "Chapter 23 Understanding Income and Taxes"— Presentation transcript:
1 Chapter 23 Understanding Income and Taxes Professional CommunicationsMrs. Alander
2 Objectives:Describe different forms of income and fringe benefits an employee can receive for doing a job.Explain gross pay and net pay, and paycheck deductions.
3 The World of Work and Income! Understanding what goes into your paycheck and what goes out is important!Most of the money earned is yours to spend, but what happens to the money that is taken out of your paycheck?
4 Forms of Income Earned income- money you receive for doing a job. Wages- set amount of pay for every hour of work.Minimum wage – set by law, lowest amount of money an employer is allowed to pay a worker per hour. ($7.25 in Texas)Salary- set amount of money paid for a certain period of time. Full year and amount is divided into equal payments.Commission- Percentage of sales they make.(Ex. Car salesman, realtor)
5 Forms of Income Piecework: fixed amount of money for each piece of workthey do.Tips: small amounts of moneygiven by customers toservice-related workers.Example: bellhop, food servers, etc.Bonus: extra money for past performance.Profit sharing: employees’ hard work results in greater profits for the company, the company returns some of those profits to the employeeFringe benefits: extra financial rewards. (company pays for insurance and a retirement plan, etc.)
6 Tax Terms Exemption-– a source or amount of income on which a person is not required to pay taxes. W-4 Form-The Employee’s Withholding Allowance Certificate that shows the employer how much tax to withhold from an employee’s paychecks. FICA-the amount of social security tax withheld from a paycheck. W-2 form-A Wage and Tax statement of the amount an employee was paid in the previous year. It also shows the income tax and social security tax withheld during the year.
7 Understanding Your Paycheck Where is all the money I earned?Paycheck stub – this will tell you how much you earned and how much was deducted from your earnings.Deductions: small amounts of money subtracted from your total pay. Other possible deductions-Federal income tax, FICA; other paycheck deductions-state/local income tax, retirement plan, union dues, insurance premiums, savings plan, charitable contributionsGross pay: total amount earned for a pay period before deductions are subtracted.Net pay (take home pay): is gross pay minus deductions.Social security tax withheldFederal income tax
12 Salary –a set amount of money paid to an employee for a certain period of time. (Ex: $40,000 annual salary)Hourly wage – a set amount of money paid to an employee per hour (Ex: $10/ per hour)Overtime pay – usually 1 ½ to 2 times the worker’s regular wage. Salaried workers are not eligible for overtime pay.
13 Types of Taxes Personal income –tax on $ you earn Social security tax – tax on percentage of $ you earn. It is used to pay for the social security program.→Both personal and social security taxes are deducted from your paycheck and sent to the federal govt.***The Social Security Program provides a basic level of income that people can supplement with savings, pensions, investments, or other insurance, retirement benefits, survivor benefits, and disabled benefits.Property tax – tax on value of your personal property and real estate. (houses, cars, land, boats and expensive jewelry)Sales Tax-tax on goods and services. Pay at time of purchase.Excise Tax-tax places on certain products or services. (Ex: gasoline, cigarettes, liquor and telephone service.
14 Supplemental Security Income (SSI) is another program administered by the Social Security Administration. It pays benefits to individuals with disabilities who have few possessions or little income.Unlike social security, these benefits are not based on your work history and the amount of your past earnings.Unlike social security, these benefits are not based on your work history and the amount of your past earnings.
15 More government benefits Worker’s compensation-Insurance programmanaged by the state.It provides paymentsto workers when theyare injured on the job.Benefits of worker’scomp include:medical care,disability income, rehabilitation and death benefits.
16 Unemployment Insurance Insurance that provides benefits to workers who have lost their jobs.
17 Government Healthcare Coverage Medicare – The federal government’s health insurance program for people 65 years old or older, people of any age with permanent kidney failure and others withcertain disabilities.Medicaid – The federalgovernment’s program thatpays for health care services for people who can’t afford payment.
18 Filing Taxes Deadline April 15 each year. 1040 – used by people that itemizetheir deductions andoftentimes requireshelp from a tax advisor.Much more comprehensive.1040EZ/1040A – relatively simple to fill out and used by an individual with no deductions.