social security & medicare. gross pay vs net pay gross pay → what your total pay is before...

SOCIAL SECURITY & MEDICARE

Gross Pay vs Net Pay

Gross Pay→ What your total pay is before deductions

Net Pay→ The amount your paycheck is for

→ Also known as your “take home pay”

Net Pay = Gross Pay - Deductions

Deductions

For each paycheck, you can have several deductions:

1. Social Security2. Medicare3. Tax Withholdings4. Retirement Plans5. Union Dues6. Many More

Social Security

Retirement benefits for people who are at least 62

Disability benefits for workers who are disabled or unable to work

Survivors’ benefits, paid to spouses and dependent children when a social security recipient dies

Originated in 1935 at 1% Current rate is 6.2%

Medicare

Medical insurance for some disabled people and people over 65

Originated in 1966 at 0.35% Current rate is 1.45%

Both Social Security and Medicare were established in the Federal Insurance Contribution Act FICA

Social Security & Medicare

Social Security Currently pay 6.2% of taxable income to

S.S. Maximum taxable income of $106,800 Increasing to $110,100 next year What is the most you could pay in Social

Security Tax in one year?


Medicare Currently pay 1.45% of taxable income to

Medicare No maximum What is the most you could pay in Medicare

in one year?

Example

Ramiro got his first job in 2006. In that year, Social Security tax was 6.2% of income up to $94,200. Medicare tax was 1.45%. If Ramiro earned $73,210 in 2006, how much did he pay in Social Security and Medicare?

Social Security= 73,210 • 0.062= 4,539.02

Medicare= 73,210 • 0.0145= 1,061.545

Total Withholdings= 4,539.02 + 1,061.55= 5,600.57

Example

What are the social security and Medicare withholdings for an executive whose annual gross earnings are $98,430 in 2007, when the maximum taxable income was $97,500?Social Security

= 98,430= 6,045

Medicare= 98,430 • 0.0145= 1,427.24

Total Withholdings= 6,045 + 1,427.24= $7,472.24

• 0.062= 97,500


Social Security Currently pay 6.2% of taxable income to

S.S. Maximum taxable income of $106,800 Increasing to $110,100 next year What is the most you could pay in Social

Security Tax in one year?


Medicare Currently pay 1.45% of taxable income to

Medicare No maximum What is the most you could pay in Medicare

in one year?

Example

You currently earn an annual salary of $247,500. You must pay a social security tax rate of 6.2% of taxable income up to $106,800.

a) What is your monthly salary?b) What month will you reach the

maximum taxable income?c) How much will you pay in social

security in February?

Example




security in Nov.?

Example




security in June?


Page 319, 2-4


Maximum you could pay into S. S. each year:Year Social

SecurityMaximum Taxable Income

Maximum You Could Pay Into S.S.

1978 6.05% 17,7001980 6.13% 25,9001982 6.7% 32,4001984 6.7% 37,8001986 7.15% 42,0001988 7.51% 45,0001990 7.65% 51,300

$1,070.85

$1,587.67

$2,170.80

$2,532.60

$3,003.00

$3,379.50$3,924.45


3) In 1990, Jerry’s gross pay was $78,000.

a) What was his monthly gross pay?b) In what month did he his the

maximum?c) How much did he pay in S.S. tax in Jan?d) How much S.S. tax did he pay in Dec?

$0

August

$497.25

$6,500


In 1978, Dawn earned $48,000.

a) What was her monthly gross pay?b) In what month did she reach the

maximum Social Security income?c) How much S.S. tax did she pay in Feb?d) How much S.S. tax did she pay in May?e) How much S.S. did she pay in Nov.?

$4,000

May

$242

$102.85

$0


Yesterday, we covered Social Security & Medicare

Social Security Currently at 6.2% Maximum taxable income of $106,800 Pay a maximum of $6,621.60

Medicare Currently at 1.45% No maximum taxable income


How much would you have to currently earn to pay as much in Medicare as you do in Social Security?


Today, we are going to create piecewise functions detailing Social Security & Medicare

Recall, a piecewise function looks like:0.15 x when 0 ≤ x < 5000.20 x when 500 ≤ x < 15000.22 x when 1500 ≤ x

C(x) =


Creating a piecewise function:

1) Create an algebraic expression for S.S. (and Medicare if applicable) for income less than the maximum amount

2) Determine total amount possible to be paid into S.S. when maximum amount is hit


Express the 2006 as a piecewise function:

2006: S.S. rate of 6.2% w/ max at $94,200

Medicare rate of 1.45% w/ no max



1999: S.S. rate of 6.2% w/ max at $72,600

Med. rate of 1.45% w/ max no max



2009: S.S. rate of 6.2% w/ max at $106,800

Med. rate of 1.45% w/ no max


Stephanie was just hired at a new job making $135,000 a year. How much will she pay in FICA taxes in her first year?


Stephanie was just hired at a new job making $135,000 a year. How much will she pay in FICA taxes in her first year?

In what month will she surpass the taxable income amount of $106,800 and how much will she pay in that month?


In 2007, the Social Security tax rate was 6.2% with a maximum taxable income of $97,500 and the Medicare tax rate was 1.45%. Express this as a piecewise function.


On Friday, we started working on the 6.5 worksheet. Finish this worksheet now.


1. Dr. Gumman got his first job in 1990. In that year, the government took out 7.45% of each income for Social Security and Medicare, until a person made $51,300. If Dr. Gumman earned $31,340 in 1990, how much did he pay to Social Security and Medicare?


2. Lauren earned a total of “d” dollars last year. The government took out 6.2% for Social Security and 1.45% for Medicare. Write an algebraic expression that represents what she paid to Social Security and Medicare combined.


3. In 1978, the Social Security and Medicare tax rate combined was 6.05% up to $17,700 earned.

a) Express the Social Security tax as a piecewise function.

b) Ten years later, the percent had increased to 7.51% and the maximum taxable income had increased to $45,000. Express this as a piecewise function.

c) If a person earned $50,000 in 1978 and $50,000 in 1988, what was the difference in taxes paid?


4. In 2010, the government took out 6.2% of earnings for Social Security to a maximum taxable income of $106,800. For Medicare, 1.45% of earnings was paid. How much money would someone have to have earned in 2010 so that their payments to Medicare were equal to their payments into Social Security?


5. In 1998, Lisa earned $149,461.20. The Social Security maximum taxable income was $68,400, and the Social Security percent was 6.2%.

a. What was her monthly gross pay?

b. In what month did she hit the maximum?

c. How much S.S. tax did she pay in May?

d. How much S.S. tax did she pay in July?

e. How much S.S. tax did she pay in June?


6. In 2010, for the first time since 2004 the maximum taxable income was not raised. Find the maximum a person could pay into Social Security in 2010.

Rate of 6.2% w/ max income of $106,800.


7. Let t(x) represent the total combined Social Security and Medicare taxes for the year 2007. If x represents the income, express this total as a piecewise function.

2007: S.S. = 6.2% max @ $97,500


8. Mr. Jackson had 2 jobs in 2005. The first job, in which he earned $74,007, was from January to August, and the second job, in which he earned $35,311, was from August to the end of the year. At the first job, he earned $74,007. As a result, he paid too much Social Security tax. How much should be refunded?


9. In 2009, Dr. Kirmser’s gross pay was $381,318.60.

S.S. = 6.2% max @ $106,800

a. What was her monthly gross pay?

b. In what month did she hit the maximum?

c. How much S.S. tax did she pay in Feb.?

d. How much S.S. tax did she pay in Sept.?

e. How much S.S. tax did she pay in April?


So far, we have: Calculated total FICA taxes Determined when you over surpass the

maximum taxable income Created piecewise functions for FICA taxes

Today: Graph these FICA taxes


In 2006, the social security tax rate was 6.2% of income up to $94,200. Graph this function:

1) What units would make sense to label the x-axis (income)?

2) What units would make sense to label the y-axis (Social Security tax)?


In 1991, the Social Security tax rate was 6.2% on income up to $53,400. Create a piecewise function for this and graph the function.


10. If x represents income, express the Social Security function s(x) for 2005 as a piecewise function.

Social Security = 6.2%Maximum taxable income of $90,000


b. Graph the Social Security function for 2005.


c. Find the coordinates of the cusp.


d. If x represents income, what is the Medicare function m(x) for 2005?


d. Graph the Medicare function for 2005 on the same axes as the Social Security function in part b.


e. Elena worked three jobs in 2005. The total of her three incomes was less than $90,000. At Hamburger Coach, she made h dollars. At the Binghamton Book Exchange, she made b dollars. At Ruby’s Restaurant, she made r dollars. Express the combined total of her social security and Medicare taxes as an algebraic expression.


f. In 2005, how much money would someone have to have earned so that their payments into Medicare were equal to their payments into Social Security? Round to the nearest dollar.


In your notebook, please complete numbers 5-10 on page 319


What would it mean if the slope of the graph was equal to 1?

Is this possible?


Some politicians have suggested removing the maximum taxable income and apply Social Security to all income. Why would this be unfair to very wealthy people?

Should this idea be implemented?


A politician is listening to a new Social Security tax plan. The graph is shown below. The two parts of the graph are disconnected where x = 100,000. Why would this be an unfair Social Security tax function?

$6,000

$8,000


5) In 1991, Social Security and Medicare taxes were itemized separately on paycheck stubs and tax forms.

a) Find the maximum a person could contribute to Social Security and Medicare:

b) If f(x) represents the Social Security tax, express this as a piecewise function.


6) Express the 1993 Social Security tax function as a piecewise function t(x), where x is the annual income. Graph the function. What are the coordinates of the cusp?


7) Graph the Social Security tax function for 1992. What are the coordinates of the cusp? On the same axis, graph he Medicare function.


8) In 2007, Jessica earned p dollars, where p >100,000. Express the amount her employer contributed to her Social Security tax in February algebraically.


9) In 1995, Eve earned d dollars, where d < 50,000. Express the amount she paid to Social Security and Medicare as a function of d.


10) Keesha earned x dollars per month in 2006, where x < $5,600.

a) Did she earn more or less than the maximum taxable income?

b) Express her Social Security tax algebraically.

c) Express her Medicare algebraically.


15) In a year when the maximum income for Social Security was $106,800, Bart worked at two jobs. In one job he earned $99,112. In his second job, he earned $56,222. Both of his employers took out Social Security tax. As a result, Bard had paid excess Social Security tax, and the government must return some of it to him. How much does the government owe him?


16) An All-Star baseball player earning $25,000,000 per year plays 162 games per year. If you divide the salary by the number of games, does that baseball player reach this year’s maximum taxable income in the first game of the year?


What we have covered in this section:a) FICA Taxes in general

a) When you earn less than the maximumb) When you earn more than the maximum

b) Piecewise Functionsa) Creating a functionb) Using a function to answer a question


What we have covered in this section:

c) Earning more than the maxc) Finding monthly payd) Finding the month you will surpass the

maximume) Calculating S.S. prior to that monthf) Calculating S.S. after that monthg) Calculating S.S. for that month



d) Graphing Social Security functionsd) Labeling the axise) Finding two pointsf) Calculating the cuspg) What happens after the cusp



e) How much would you have to earn so that you pay the same amount into Medicare that you pay into Social Security

f) Questions that we reviewed together about graphs



g) Social Security refundh) Algebraic expressions

social security & medicare. gross pay vs net pay gross pay → what your total pay is before...

Documents

social security medicare

social security recipient

social security tax

medicare tax

total pay

home pay net pay

maximum taxable income

medicare withholdings