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Unit B: Career and Educational Exploration
Competency CM03.02
Evaluate Career Goals in terms of the experience, knowledge and skills needed to achieve them.
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Objective CM03.02Check the progression of formal and informal learning experiences toward achieving personal and career goals
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Essential Questions
1. What are the ways in which an employee can be paid?
2. What should employees know about employment and income tax forms?
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PAYDAY
1. Have you ever worked for pay?
2. Did you look forward to paydays?
3. Journal Entry: List words to describe you feelings on paydays.
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A Payday candy bard could serve as a symbol of monetary compensation for work.
• Eat Now and enjoy
• Trade for something else
• Save for later
• Give away
• Enjoy the smell
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Activity
Use available textbooks to search for all types of monetary and non-monetary compensations for work.
List these on the handout Appendix 4.01A, “Forms of Compensation for Work,” then write an explanation and give at least one example of each.
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Types of Compensation for Work
Types of monetary compensation---wage, salary, commissions, tips, bonuses
Wage---an amount of money paid for a specified quantity of labor Minimum wage---the lowest wage employers may legally pay
workers Types of wages---full-time, part-time, flexible/seasonal, and
overtime Salary-a set amount of income paid for a set period of time
worked Commission-income paid as a percentage of sales made by a
salesperson
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Types of Compensation for Work
Types of monetary compensation---wage, salary, commissions, tips, bonuses
Tips-also known as gratuities-monies paid by customers to those who provide services
Tips-also known as gratuities-monies paid by customers to those who provide services
Bonus-money in addition to base pay, either as reward for performance or as share of profit
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Types of Compensation for Work
Types of non-monetary compensation---also known as benefits
Vacations, holidays and sick leave Insurance Savings/retirement plans Education-related benefits---tuition, credits, job
training Family -related benefits---child care, maternity leave,
adoption leave/support, family leave
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Read the ingredients list on the label. Just as each candy slice contains some of
each ingredient, so each paycheck contains specific kinds of information.
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Activity
Have students scan FEFE 1.13.1.F1 information sheet “Understanding Your Paycheck” and complete the graphic organizers Appendix 4.01A, “Forms of Compensation,” Appendix 4.01B, “Money In, Money Out,” and Appendix 4.01C, “Employment, Wage and Tax
Forms”
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Activity
Have students complete the note-taking guide, FEFE 1.13.1. L1, “Understanding Your Paycheck and Tax Forms” as they view FEFE PowerPoint “Understanding your Paycheck.” Answer questions; discuss.
(In advance, download a blank Form W-4 and Form I-9 from www.irs.gov). Stop at slides 12 and 13 and guide students as they complete Form W-4 and Form I-9.
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Paychecks and Tax Forms
Take Charge of your Finances
Family Economics & Financial Education
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Where Does My Money Go?
• Almost 31% of an individual’s paycheck is deducted– Taxes are the largest expense most
individuals will have– Therefore, it is important to understand
the systematic deductions• U.S. tax system operates on an
ongoing payment system– Taxes are immediately paid on income
earned
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Paying Employees
Three methods employers may use to pay employees:
1. Paycheck – payment given with a paper check with a paycheck stub attached• Most common method• Employee responsible for handling the
paycheck• Immediately see payroll stub and
deductions
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Paying Employees continued
2. Direct Deposit - employers directly deposit employee’s paycheck into the authorized employee’s depository institution account• Employee receives the paycheck stub
detailing the paycheck deductions• Most secure because there is no direct
handling of the check • Employee knows exactly when paycheck
will be deposited and available
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Paying Employees continued
3. Payroll Card - payment electronically loaded onto a plastic card• Funds are directly deposited by an
employer into an account at a depository institution that is linked to the payroll card– Parties involved:
» Employer» Employee» Depository institution
• Use the payroll card for ATM withdrawals or to make purchases
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Payroll Card
• There are numerous fees associated with payroll cards– Number of fees depends upon the depository
institution– Examples:
• Monthly or annual fee• ATM fee• Inactivity fee• Fee after a specific number of transactions have been used• Replacement fee if the card is lost, stolen , or destroyed• Load fee (when funds are placed on the card account)• Point of sale (POS) fee for using the card at a POS terminal,
or an electronic payment processor
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Benefits of Using Payroll Cards
• Employers– Lower internal costs
• Costs associated with producing, handling, and distributing pay checks is eliminated
• Depository Institutions– Profit from the fees
charged to employees, employers, and merchants
• Employees– Safer than carrying large
amounts of cash– Unbanked employees do not
have to pay check cashing fees• Americans roughly spend $8
billion annually in check cashing fees
– Can access electronic monthly statement of transactions
– Can receive a second card• Give allowances to children• Send money internationally
– Easily make online purchases
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Consumer Protection with Payroll Cards
• Regulation E – Electronic Fund Transfer Act– Protects payroll card holder from
fraudulent charges on lost or stolen cards• Card holder is only liable for $50 if a lost or
stolen card is reported within 48 hours
– Over four million paychecks are stolen annually with no protection to employees
– Regulation E provides exceptional safety and protection for payroll card holders
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Taxes
• Taxes – Compulsory charges imposed on citizens by local, state, and federal governments.– Used to provide public goods and services.– Largest amount of taxes a person pays is on
his/her income.
• Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress.
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Starting a New Job
To receive a paycheck, an employee must:– Complete a Form W-4
• Employee’s Withholding Allowance Certificate
– Complete a Form I-9• Employment Eligibility Verification• http://www.formi9.com/form-i9-employment-
verifications.aspx
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Form W-4
Employee’s Withholding Allowance Certificate– Determines the percentage of gross pay
which will be withheld for taxes• Allowances
– Used to determine the amount of federal taxes withheld from the paycheck
– A person may claim a personal allowance if no one else claims the person as a dependent•Dependent – a person who relies on the taxpayer
for financial support
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Steps to Completing a Form W-4
• Print or type legal name on Line 1 and home address directly below the name
• Write Social Security number on Line 2• On Line 3, check the appropriate box to
indicate marital status• Enter a zero on Line 5 if not claiming any
allowances• Sign name and date the form before giving
it to the employer• Keep a copy for personal records
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Form I-9
Employment Eligibility Verification Form• Used to verify the eligibility of individuals
to avoid hiring undocumented workers or others who are not eligible to work in the United States
• Must provide documentation which establishes identity and employment eligibility– Examples include driver’s license, passport,
Social Security card, and birth certificate
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Reading a Paycheck
Family Economics & Financial Education
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Paycheck Stub
Paycheck Stub– A document included each pay period
which outlines paycheck deductions
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 28Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Personal Information
Personal Information– States the employee’s full name, address, and Social
Security or Employee Identification number– Always check to ensure this information is correct
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 29Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Pay Period
Pay Period– The length of time for which an employee’s wages are
calculated; most are weekly, bi-weekly, twice a month, or monthly
– The last day of the pay period is not always payday to allow a business to accurately compute wages
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 30Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Gross Pay
Gross Pay– The total amount of money earned during a pay period
before deductions• This is calculated by multiplying the number of hours
worked by the hourly rate• If a person is on salary, it is the total salary amount
divided by the specified number of pay periods
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 31Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Net Pay
Net Pay– The amount of money left after all deductions
have been withheld from the gross pay earned in the pay period
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 32Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Deductions
Deductions– The amount of money subtracted from the gross pay
earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 33Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Federal Withholding Tax
Federal Withholding Tax– The amount required by law for employers to withhold from earned
wages to pay taxes– The amount of money deducted depends on the amount earned and
information provided on the Form W-4– Largest deduction withheld from an employee’s gross income
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 34Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
State Withholding Tax
State Withholding Tax– The percentage deducted from an individual’s paycheck
to assist in funding government agencies within the state
– The percentage deducted depends on the amount of gross pay earned
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 35Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
FICA (Federal Insurance Contribution Act)
FICA– This tax includes two separate taxes: Fed OASDI/EE or Social
Security and Fed MED/EE or Medicare– These two taxes can be combined as one line item or itemized
separately on a paycheck stub
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 36Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Social Security
Social Security– Nation’s retirement program, helps provide retirement income
for elderly and pays disability benefits– Based upon a percentage (6.2%) of gross income, employer
matches the contribution made by the employee
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 37Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Medicare
Medicare– Nation’s health care program for the elderly and
disabled, provides hospital and medical insurance to those who qualify
– Based upon a percentage (1.45%) of gross income
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 38Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Medical
Medical– The amount taken from the employee’s paycheck for
medical benefits– Occurs when the employer has a medical plan for
employees but does not pay full coverage for his/her benefits
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 39Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Retirement Plan
Retirement Plan– The amount an employee contributes each pay period to
a retirement plan– A specified percentage of the contribution is often
matched by the employer– May be a 401K, a state, or local retirement plan
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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1.13.1.G1
© Family Economics & Financial Education – Revised March 2008 – Paychecks and Taxes Unit – Understanding Your Paycheck – Slide 40Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Year-to-Date
Year-to-Date• Total of all of the deductions which have been withheld
from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub
On-The-Go
EmployeeBeakens, Joe
Employee Identification201-92-4856
Check #164
Check Amount$1,102.98
Employee Address293 Michael GroveBillings, MT 59102
Pay Type-Gross Pay
Deductions Current Year-to-date
$1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social SecurityFed MED/EE or MedicareMedical401K
$106.00$40.82$83.91$19.62$0.00$0.00
$503.46$117.72$636.00$244.92$0.00$0.00
Totals $250.35 $1,502.10
Pay Period 6/11/2004-7/11/2004
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Ways employees are paid
Paycheck Traditionally, a paper document issued to an
employee for services rendered Traditionally, the most common method of
payment for work Employer physically provides the employee
with his/her paycheck
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Ways employees are paid
Paycheck stub Attached to the paycheck to show the
deductions Monetary deductions subtracted for
mandatory systematic taxes, employee- sponsored medical benefits, and/or retirement benefits
Other deductions include insurance, investments, and other fringe benefits
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Contents of paycheck stub gross pay, net pay, hourly wage, hours worked, state/federal withholdings, Social Security income tax, employee’s name, Social Security number, total earned and withheld, year to date, last day of pay period
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Ways employees are paid
Direct deposit When employers directly deposit an employee’s
paycheck into an authorized account Employee receives on payday a paycheck
stub/electronic notice showing deductions This method is more secure because there is no
direct handling of the check and the employee knows exactly which day paycheck will be deposited and available for use
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Ways employees are paid
Payroll card A prepaid card offered to employees as an alternative to paper
paychecks or directly depositing wages into an employee’s financial institution account
Benefits to employees Reduces or eliminates check cashing fees Offers ability to make purchases using credit card networks Offers 24-hour access to funds via ATMs; no need to wait in lines Reduces the need to carry a lot of cash Makes money transfers more easily available to families Provides a pseudo-bank account—funds do not need to be
withdrawn entirely as when using a check casher
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Ways employees are paid
Payroll card A prepaid card offered to employees as an alternative to paper
paychecks or directly depositing wages into an employee’s financial institution account
Benefits to employers Reduces bank processing and check handling fees Reduces check printing costs Reduces likelihood of check fraud Reduces check reconciliation costs Increases employee productivity (no time off to cash or deposit
paycheck) Reduces lost/stolen check replacement costs
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Forms for work and income taxes
Income taxes are taxes paid on earnings. They are known as progressive taxes; the
higher the income earned, the higher the amount of taxes.
In contrast, sales taxes are regressive taxes; they impose higher tax rates on those with lower incomes than those with higher.
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Forms for work and income taxes
Forms and materials Used when a person begins a job
W-4 – the Employee’s Withholding Allowance Certificate; information provided here determines the percentage of gross pay to be withheld for taxes
I-9 – the Employment Eligibility Verification form; information gathered in this form is for employers to verify eligibility of individuals for employment; helps avoid hiring undocumented workers or others who are not eligible to work in the United State
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Forms for work and income taxes
Forms and materials Used when filing income taxes
W-2 - states amount of money earned and taxes paid through previous year
Form 1040/1040A/1040EZ - common forms for filing federal income tax return
1099 Forms - Tax forms that report other sources of income earned during a tax year. 1099-INT for interest income, 1099-DIV for dividends on investments, and 1099-MISC for other sources of income
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Forms for work and income taxes
Forms and materials Used when filing income taxes
Records of deductible expenses, including receipts and bank statements
Social Security number serves two major purposes: (1) provides a record of your covered earnings for retirement and disability benefits and (2) serves as an identification number for the Internal Revenue Service
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Activity
Have students use the List-Group-Label literacy strategy to name the categories of terms in Appendix 4.01D, “List-Group-Label.”
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Journal Entry
Display the Jump$tart principle, “Know your take home pay.”
Discuss the difference between gross and net pay.
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Activity
Distribute FEFE 1.13.1.A2, “Paycheck Stub 1” and 1.13.1.A3, “Paycheck Stub 2.”
Have students work in pairs and use the KWC numeracy strategy with the Appendix 4.02E, “KWC Chart” to complete the first check stub activity.
Have students work independently to complete the second check stub.
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Activity
Using a Twister game mat, have students play FEFE 1.13.1.J1, “Where Did All the Earnings Go?”
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Activity
Have students complete Appendix 4.01F, “Scenarios: Payroll Forms”.
Provide sample W-4, I-9, and W-2 forms for students to complete using information about the two brothers in the scenario.
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Activity
As a review, have students complete FEFE 1.13.1.A6, “Paychecks Math” and 1.13.1.A5 “Paychecks.”
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Internal Revenue Service www.irs.gov/formspubs
Social Security Administration www.ssa.gov/online/ss-5.html
Office of the Comptroller of the Currency www.occ.treas.gov/cdd/payrollcards
Social Security Online http://www.ssa.gov/OACT/ProgData/taxRates.html
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TERMS
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WAGE
The amount of money paid for a specified quantity of labor.
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Salary
• A set amount of money paid for a set period of time worked.
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Commission
• Income paid as a percentage of sales made by a salesman
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Tip
Money paid by customers to those who provide services.
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Bonus
Money paid in addition to base pay, either as a reward for performance or as a share of profit.
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paycheck
A form of payment to an employee
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direct deposit
An employer deposits the employee’s paycheck directly into the authorized employee’s depository institution account.
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payroll card
A prepaid card that is offered to employees as an alternative to paper paychecks or directly depositing wages into an employee’s depository institution
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paycheck stub
This part lists the paycheck deductions as well as other important information.
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pay period
The length of time for which an employee’s wages are calculated.
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gross pay
The total amount of money earned during the pay period before deductions.
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net pay
The amount of money left after all the deductions have been taken from the gross pay earned in the pay period.
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deduction
Money subtracted from gross pay for required taxes, employee insurance, and retirement benefits.
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federal withholding tax
The amount required by law for employers to withhold from earned wages to pay federal income taxes.
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state withholding tax
The percentage deducted from an individual’s paycheck to assist in funding government agencies within the state.
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FICA
Federal Insurance Contributions Act. This tax includes Social Security and Medicare. Social Security taxes are based on a 6.2 percentage of the employee’s gross income. Medicare is 1.45% of gross income.
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retirement plan
The amount an employee contributed each pay period to a retirement plan.
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medical
The amount taken from the employee’s paycheck for medical benefits.
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year-to-date deductions
The total of all deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period
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tax
A compulsory charge imposed on citizens by local, state, or federal governments.
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progressive tax
The higher the income, the higher the amount of taxes paid
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regressive tax
They impose a higher tax rate on those with lower incomes than those with higher
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Form W-2
States the amount of money earned and taxes paid throughout the previous year
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Form W-4
An employee’s withholding certificate---the information provided on this form determines the percentage of gross pay to be withheld for taxes
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Form I-9
Employment Eligibility Verification Form---the information on this form is for employers to verify the eligibility of individuals for employment.
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1099 Forms
Tax forms that report other sources of income earned during a tax year.
1099-INT- Interest income earned on savings and/or investment accounts during the previous year.
1099-DIV- Dividends earned on investments during the previous year.
1099-MISC- Income earned from self-employment, royalties, rent payments, unemployment compensation, and other sources.
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Journal Entry