chapter 2 net pay
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Chapter 2 Net Pay. 2.1 Deductions from Gross Pay. 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 - PowerPoint PPT PresentationTRANSCRIPT
Chapter 2 Net Pay
2.1 Deductions from Gross Pay
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
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% + 1.45%)
C. $24,000 x 0.0765 =
D. $87,900 x 0.062 =
$89,000 x 0.0145 =
E. $460 x 0.0765 =
F. $712.44 x 0.0765 =
G. $1,087.30 x 0.0765 =
H. $375.88 x 0.0765 =
Total Deductions and Net Pay
• Withholding Taxes
• Social Security
• Medicare
• Other Deductions
• Net Pay = Take Home Pay
• Gross Pay – Deductions = Net Pay
I. $410 x 0.0765 =
$410 – 39 – 31.37 - 34.88 - 40 =
J. $820 x 0.0765 =
$810 – 118 – 61.97 – 74 – 45 =
2.2 Benefits and Expenses
Total Job Benefits
• Employee benefits – Fringe benefits
• What are some examples of job benefits?
• Benefit 1 + Benefit 2 = Total Employee
Benefits
Benefit Rate x Gross Pay = Total Employee
Benefits
Gross Pay = Employee = Total Job Benefits Benefits
• A. 1. $2,580 + $3,133 + $2,545 =
2. $31,807 + $8,258 =
B. $28,089 x 0.33 =
28,089 + 9,269.37 =
Net Job Benefits
• Job Expenses - Examples
Total Job – Job Expenses = Net JobBenefits Benefits
C. $56,102 – 329-278-475-1,077 =
D. 78,299-580-1,793-2,057 =
Comparing Net Job Benefits
E. Job 1 41,700 x 0.32.5 =
41,700 + 13,552.5 =
55,252.50 – 3,180 =
Job 2 45,260 x 0.24 =
45,260 + 10,862.40 =
56,122.40 – 3,740 =
F. Job 1 49,500 x 0.29 =
49,500 +14,355 =
63,855 – 650-1,890-375-480 =
Job 2
45,200 x 0.34 =
45,200 + 15,368 =
60,568 – 2,560 – 480 – 590 – 380 =
2.3 Federal Income Taxes
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
• 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
• 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
A. AGI 65,000
- Ded 4,850
- Exe 3,100
Tax Inc
B. AGI 50,000
- Ded 10,500
- Exe 9,300
Tax Inc
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
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?
2.4 State and City Income Taxes
State and City Flat Income Tax
• Flat tax is the same tax to everyone usually stated as a % of earnings
A. 34,100 x 0.015=
B. 29,900 x 0.028 =
State & City Graduated Income Taxes
• As your income goes up the amount of taxes you pay goes up
C. 43,600 - 40,000 =3,600 x 0.07 = 1,600 + 252 = D. 38,200 – 32,000 = 6,200 x 0.06 = 1,120 + 372 =
2.5 Cash Receipts and Payment Records
• Cash receipts records – Written records of $ received
A. Date Explanation Amount May 1 Interest from Savings +27.89 2 Birthday Gifts +75.00 3 Jose’s pay +745.98 3 Louisa’s pay +635.78 5 Received rebate +50.00
• B. 154.40 +83.75+190.45+275.90+
150.80 =
Columnar Cash Payments Record
• Cash payments are written records of $ paid out
C. 27.88+95.85+4.50+54.91+135.67+25+
47.89 =
D. 700+123.83+62.28+70+52.76+100=
2.6 Budgets
Expense Percentages
• Summarize expenses and receipts with percentages
• Helps to compare past, present, and future
• Can use specific categories to help with spending
A. 6,400 / 128,000 =
B. 338,200 / 475,000 =
Budgeting
• Budgets are future spending plansC. 0.05 x 4,500,000 = D. 0.025 x 5,489 =
Fixed IncomeVariable IncomeFixed ExpensesVariable Expenses