1. © 2014 Cengage Learning. All Rights Reserved. Do Now: Jigsaw ●Those of you with same cards should group together to read article at respective station in front of room ●Summarize your articles using bullet points on your respective large chart paper ●Be prepared to present your findings to the rest of the class SLIDE 1

2. © 2014 Cengage Learning. All Rights Reserved. Voluntary Deductions from Earnings ●A retirement savings plan approved by the Internal Revenue Service that provides individuals with a tax benefit is called a qualified retirement plan. ●A 401(k) is a qualified retirement plan sponsored by an employer. ●An individual retirement account (IRA) is a qualified retirement plan that provides most individuals with a deferred federal income tax benefit. ●A Roth individual retirement account (Roth IRA) is a qualified retirement plan that allows tax-free withdrawals from the account. SLIDE 2 LO5 Lesson 12-2

3. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-2 Audit Your Understanding 1.Where does an employer get the information used to determine the amount of federal income tax to withhold from employees’ earnings? SLIDE 3 ANSWER Form W-4, Employee’s Withholding Allowance Certificate Lesson 12-2

4. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-2 Audit Your Understanding 2.Employee federal income tax withholdings are based on what two factors? SLIDE 4 ANSWER Employee marital status and number of withholding allowances Lesson 12-2

5. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-2 Audit Your Understanding 3.Does the employer or employee pay social security tax and Medicare tax? SLIDE 5 ANSWER Both the employee and employer pay. Lesson 12-2

6. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-2 Audit Your Understanding 4.What is the difference in the tax impact of contributions between a 401(k), an IRA, and a Roth IRA? SLIDE 6 ANSWER Only the contributions to a 401(k) and an IRA are deducted from earnings before payroll taxes are calculated. Lesson 12-2

7. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-2 Audit Your Understanding 5.Are the withdrawals from a 401(k), an IRA, and a Roth IRA subject to income taxes? SLIDE 7 ANSWER The withdrawals from the 401(k) and an IRA are subject to income taxes; withdrawals from a Roth IRA are tax free. Lesson 12-2

8. © 2014 Cengage Learning. All Rights Reserved. Scenario #1 ●I am 22 and just started my new job ●I feel that the tax bracket will be higher when I’m older, so I’d rather be taxed now as opposed to later ●I don’t really care about receiving a tax benefit now…just as long as I receive one when I do retire SLIDE 8

9. © 2014 Cengage Learning. All Rights Reserved. Scenario #2 ●I currently work for a major Accounting firm ●I would like to make contributions to my retirement account without paying taxes before I make deposits on them ●It would be nice for someone else to match my contributions into my retirement account as well SLIDE 9

10. © 2014 Cengage Learning. All Rights Reserved. Scenario #3 ●I am 45 years old ●I would like to have a retirement account separate from the company for whom I work ●I would like to make contributions directly into my account, but I know my employer can also withhold contributions from my earnings, although that won’t reduce earnings subject to federal income taxes SLIDE 10

11. © 2014 Cengage Learning. All Rights Reserved. Sort Cards ●Write down different ideas you would have as to how you would calculate an employee’s net pay for one pay period, as well as for multiple periods ●Share ideas in small groups and eliminate duplicates ●Sort ideas into order you deem appropriate, first being most likely to be correct and last being most likely to be incorrect ●Class discussion about how you categorized, called metacognitive processing SLIDE 11

12. © 2014 Cengage Learning. All Rights Reserved. Payroll Register ●A payroll register summarizes the earnings, deductions, and net pay of all employees for one pay period. ●Total earnings paid to an employee after payroll taxes and other deductions is called net pay. SLIDE 12 LO6 Lesson 12-3

13. © 2014 Cengage Learning. All Rights Reserved. Payroll Register SLIDE 13 LO6 Lesson 12-3 Pay Period Date 1 1 Earnings 4 4 Social Security Tax 6 6 Medicare Tax 7 7 Health Insurance 8 8 Retirement Plan 9 9 Payment Date 2 2 Employee Personal Data 3 3 Federal Income Tax 5 5 Total, Prove, and Rule 12 Net Pay 11 Total Deductions 10 Check Number 13

14. © 2014 Cengage Learning. All Rights Reserved. Pair & Share ●Attempt 12-3 Work Together with a partner ●Notify me when you are finished SLIDE 14

15. © 2014 Cengage Learning. All Rights Reserved. Employee Earnings Records ●A business must send IRS quarterly and annual reports of employee earnings and tax withholdings. ●A business form used to record details of an employee’s earnings and deductions is called an employee earnings record. ●Total earnings, not net pay, is added to previous accumulated earnings record ●Total earnings is amount compared to tax base to determine if social security taxes should be withheld SLIDE 15 LO7 Lesson 12-3

16. © 2014 Cengage Learning. All Rights Reserved. Employee Earnings Records SLIDE 16 LO7 Lesson 12-3 Beginning Accumulated Earnings 3 3 1 1 Last Day of Quarter 4 4 Pay Period 2 2 Employee Personal Data 6 6 Updated Accumulated Earnings 7 7 Total and Prove 5 5 Earnings, Deductions, Net Pay

17. © 2014 Cengage Learning. All Rights Reserved. Pair & Share ●Attempt 12-3 On-your-Own with a partner ●Notify me when you are finished SLIDE 17

18. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-3 Audit Your Understanding 1.What does the payroll register summarize? SLIDE 18 ANSWER The payroll register summarizes the payroll for one pay period and shows total earnings, payroll withholdings, and net pay for all employees. Lesson 12-3

19. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-3 Audit Your Understanding 2.How is net pay calculated? SLIDE 19 ANSWER By subtracting total deductions from total earnings Lesson 12-3

20. © 2014 Cengage Learning. All Rights Reserved. Lesson 12-3 Audit Your Understanding 3.Why do companies complete employee earnings records? SLIDE 20 ANSWER Because a business must send quarterly and annual reports to federal and state governments showing employee taxable earnings and taxes withheld from employee earnings Lesson 12-3

21. © 2014 Cengage Learning. All Rights Reserved. Closure ●How would you receive payment in your retirement accounts? ●What about payment for work performed? SLIDE 21