1. Understanding Income and Taxes

2. Terms to Know Earned Income Wage Salary Piecework Tips Bonus
Profit Sharing
Deductions
Gross Pay
Net Pay
Exemption
W-4 Form
FICA
W-2 Form
SSI
Medicare
Medicaid
Unemployment

3. Forms of Income Wages Salary Commission Piecework Tips Bonus
Fringe Benefits

4. Forms of Income Wage: set amount of pay for every hour Minimum wage
Receive a paycheck either weekly or bi-weekly
Salary: set amount of money paid for a period of time
Amount of $ divided equally over a year
Ex: $75,000 a year

5. Forms of Income Commission: % of sales you make
The more you sell, the more you make!
Piecework: paid a fixed amount of $ for each piece of work you do

6. Forms of Income Tips: small amounts of money given by customers
Usually workers receive an hourly wage plus tips
Bonus: Extra payment in addition to the workers’ regular pay
Incentives
Year-end bonuses

7. Forms of Income
Profit Sharing: If the employees’ hard work results in greater profits for the company, the company returns some of those profits to the employees

8. Forms of Income Fringe Benefits: Receive extra financial rewards
Vacation
Holidays
Sick leave
Health & Life insurance

9. Understanding your paycheck
Upon receiving your paycheck, many are surprised to find it smaller than expected.
For each paycheck received, part of your earnings are deducted by your employer.

10. Understanding your paycheck
Gross Pay: total amount of money
Net Pay: gross pay – deductions

11. Understanding your paycheck
Exemption: set amount of $ on which you do not have to pay tax
Each exemption you claim lowers the amount of tax deducted from your paycheck
Always claim 1(yourself)
Claim more than one if you have children and/or spouse

12. Understanding your paycheck
When you begin a job, you must complete a W-4 Form
W-4 Form: lets the employer (your job) know how much taxes to take out of your paycheck

13. Understanding your paycheck
FICA (Federal Insurance Contributions Act): the amount of social security tax withheld from your paycheck
Example:
$ (Gross)
- $ (State, Federal, and SS taxes)
__________________
$ (Net)

14. Paycheck Activity Hours worked 40 Regular earnings $ 260.00
FICA $
Federal Tax $
State Tax $
Pay $

15. Paycheck Activity
Lady Gaga works full-time during the summer at a local fast-food restaurant & this is her paycheck stub.
What is Lady Gaga’s gross pay?
How much were the total deductions made from her paycheck?
What is Lady Gaga’s net pay?
How many hours did she work for one week?
What is her hourly wage?
Why did Lady Gaga have to fill out a W-4 form?
If Lady Gaga is single and is claimed by her parents’ tax return as an exemption. Can she claim herself as an exemption on her W-4 form?

16. Taxes
Taxes are payments that citizens (you) and businesses are required to pay to city, county, state, and federal governments.
A Personal Income
Tax
B Social Security Tax
C Property Tax
D Sales Tax
E Excise Tax

17. Types of Taxes
Personal Income tax: a tax on the amount of money a person earns
Social Security tax: also a tax on a person’s income

18. Types of Taxes
Property tax – tax on the value of personal property and real estate a person owns
ex: houses, land, cars, boats, etc.

19. Types of taxes
Sales tax – tax on goods and services, you pay this everytime you buy something!
Excise tax- tax placed on gasoline, cigarettes, liquor, telephone service

20. Services & Facilities Funded by Tax Dollars
Airports
Community colleges
Fire protection
Garbage collection
Hospitals
Libraries
Medicaid benefits
Medicare benefits
National defense
Parks & recreation
Police protection
Public schools
Public transportation
Public welfare
Road maintenance
Scientific research
Social Security benefits
State universities
Unemployment insurance
Workers’ compensation

21. Taxes
Direct taxes: charged directly to the taxpayer….personal, property and sales tax
Indirect taxes: included in the price of taxed items….excise taxes on cigarettes and gasoline

22. Taxes
Progressive taxes: takes a greater share of income from the rich than the poor…..As you make more money, you get taxed higher!
Regressive taxes: opposite of progressive tax….sales tax

23. Preparing Tax Returns
It is possible for your employer to either deduct too much taxes or not enough
Every year you must file a tax return to determine if you overpayed or didn’t pay enough taxes
In January of each year, you will receive a W-2 Form

24. W-2 Form
W-2 form shows the amount of $$ you were paid in the previous year & how much taxes were deducted

25. Tax Forms The 3 common forms for filing a federal tax return are:
1040EZ 1040A 1040

26. Preparing your taxes Get all financial records together
Read all instructions carefully
Prepare form in pencil first
Make a copy of the completed form

27. Social Security Benefits
Retirement
Disability
Survivors
Medicare
Medicaid

28. Medicare vs Medicaid 65 or older Anyone with permanent kidney failure
Certain people with disabilities
Funded by Gov’t
Pays for health services for people who can’t pay for it
Low-income people who are aged, blind or disabled

29. Worker’s Compensation
Worker’s compensation: another insurance program managed by the states, people who are injured on the job.

30. Worker’s Compensation
The major benefits provided by workers’ compensation are the following:
Medical care
Disability income
Rehabilitation benefits
Death benefits

31. Unemployment Insurance
Unemployment insurance: provides benefits to workers who have lost their jobs.
It’s temporary, until you find another job!