How does your employer know how much to take out of your paycheck for deductions? PowerPoint Presentation, PPT - DocSlides

How does your employer know how much to take out of your paycheck for deductions? PowerPoint Presentation, PPT - DocSlides

2018-09-18 1K 1 0 0

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Take-Home Pay. The deductions taken out of your paycheck help support . schools, roads, national parks, and more.. Why do you have to pay taxes?. Deductions – Memorize these. 1.0% - Local. 7.65%- Total Social Security and Medicare. ID: 670327

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Presentations text content in How does your employer know how much to take out of your paycheck for deductions?

Slide1

How does your employer know how much to take out of your paycheck for deductions?

Slide2

Take-Home Pay

The deductions taken out of your paycheck help support

schools, roads, national parks, and more.

Why do you have to pay taxes?

Slide3

Deductions – Memorize these

1.0% - Local

7.65%- Total Social Security and Medicare6.2% - Social Security Normally4.2% - Social Security currently (until January 1, 2013)1.45%- Medicare3.07% - PA State Tax.08%- PA Unemployment TaxWhy isn’t Federal listed? Base on three things (W-4 form) Employees withholding allowance certificate. Marital Status, Earnings, Allowances you claim

Slide4

Take heart, America. Even celebrities pay taxes on April 15.Well, sometimes.

Nicolas Cage’s bookkeeping got a bit muddled, and now he has to shell out $13.3 million to the federal government.

Joe Francis, founder of “Girls Gone Wild,” forgot, too. His tab? $29.4 million -- or roughly 5 million margaritas.Sinbad the Comedian? A very unfunny $8.15 million, which doesn't even include interest and legal fees.Other celebs who owe the taxman big bucks are Pamela Anderson ($1.7 million), the rapper Nas ($3.4 million), singer Dionne Warwick ($2.2 million) and actor Terrence Howard ($1.1 million). (Click here to see some of the celebs on the IRS’ hit list)Celebrity Tax Evaders Hit List

Slide5

Tax Rate

Single

Married Filing Joint

Head of Household

10%

Up to $8,600

Up to $17,200

Up to $12,250

15%

$8,601 – $34,900

$17,201 – $69,800

$12,251 – $46,750

25%

$34,901 – $84,500

$69,801 – $140,850

$46,751 – $120,700

28%

$84,501 – $195,950

$140,851 – $237,700

$120,701 – $216,800

36%

$195,951 – $383,350

$237,701 – $383,350

$216,801 – $383,350

39.6%

Over $383,350

Over $383,350

Over $383,350

Slide6

Formula

Gross Income - Deductions = Net Income (take home pay)

Mandatory:Federal – FIT (W-4: marital status, amount of income, exemptions)PA state – 3.07% (.0307)Local – 1.0% (.01)Social Security – normally, 6.2% (.062) (first $110,100), currently 4.2% (.042) for employees.Medicare – 1.45% (.0145)PA Unemployment Tax - .08% (.0008)Voluntary:Medical, savings, investing, scholarship, etc.

Slide7

Starting a New Job

To receive a paycheck, an employee must:

Complete a Form W-4 Employee’s Withholding Allowance CertificateComplete a Form I-9Employment Eligibility Verification

Slide8

Personal exemptions in dollar amounts

2012: $3,800

2011: $3,7002010: $3,6502009: $3,6502008: $3,5002007: $3,4002006: $3,300DependentsYourselfSpouseBlood relativesDonations Mortgage interestEtc.

Slide9

Form W-4

Employee’s Withholding Allowance Certificate

Determines the percentage of gross pay which will be withheld for taxesWithholding AllowancesThe number of people an employee supports.Used to determine the amount of federal taxes withheld from the paycheckThe more allowances you claim on Form W-4, the less income tax your employer will withhold. You will have the most tax withheld if you claim “0” allowances.Dependent – a person who relies on the taxpayer for financial support2012 W-4 Form

Slide10

Steps to Completing a Form W-4

Print or type legal name on

Line 1 and home address directly below the nameWrite Social Security number on Line 2On Line 3, check the appropriate box to indicate marital statusComplete the “Personal Allowances Worksheet” above the form (A-H)Enter a one or a zero on Line 5 Can you claim exempt on Line 7? See “Exemption from Withholding” handout.

Slide11

Steps to Completing a Form W-4 continued

7

. Sign name and date the form before giving it to the employer8. Keep a copy for personal recordsRemember: The more allowances you claim on Form W-4, the less income tax your employer will withhold. You will have the most tax withheld (deducted) if you claim “0” allowances.**Exempt,….. 6, 5, 4, 3, 2, 1, 0 ( moving left to right, more money will be deducted, from zero to maximum)** no federal taxes in last year, less than $5700 earned and $300 unearned income

Slide12

Form I-9 (copy attached to W-4)

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 StatesMust provide documentation which establishes identity and employment eligibilityExamples include driver’s license, passport, Social Security card, and birth certificate

Slide13

Who’s responsible for all this?????

Slide14

Answer: President Abe Lincoln

Slide15

Paying Employees

Three common methods employers may use to

pay employees:Paycheck- Employee responsible for handling the paycheckImmediately see payroll stub and deductions

Slide16

Paying Employees continued

Direct Deposit-

Employers directly deposit employee’s paycheck into the authorized employee’s depository institution accountEmployee receives the paycheck stub detailing the paycheck deductionsMost secure because there is no direct handling of the check Employee knows exactly when paycheck will be deposited and available

Slide17

Paying Employees continued

3.

Payroll Card-A payroll card electronically carries the balance of the employee’s net payFunds are directly deposited by an employer into an account at a depository institution that is linked to the payroll cardUse the payroll card for ATM withdrawals or to make purchases

Slide18

Paycheck Stub

Do you understand everything you see on your paycheck stub?

Slide19

Paycheck Stub

Paycheck Stub

A document included each pay period which outlines paycheck deductionsOn-The-Go

Employee

Beakens, Joe

SSN

201-92-4856

Check #

164

Check Amount

$1,102.98

Employee Address

293 Michael Grove

Billings, MT 59102

 

 

Pay Type-

Gross Pay

Deductions

Current

Year-to-date

 $1,353.33

Federal Withholding

State Withholding

Fed OASDI/EE or Social Security

Fed MED/EE or Medicare

Medical

401K

$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 6/11/2009-7/11/2009

Slide20

Personal Information

Personal Information

States the employee’s full name, address, and Social Security numberAlways check to ensure this information is correct

Slide21

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 monthlyThe last day of the pay period is not always your payday to allow a business to accurately compute wages

Slide22

Deductions

Deductions

The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits

Slide23

Lesson Objective

Determine the amount withheld for federal income tax.

Who collects the taxes?

Slide24

Taxes

Internal Revenue Service

(IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress.

Slide25

  1992

1993 - 2000

  2001

  2002

  2003 -

2009

  2011

15%

15%

15%

10%

10%

10%

15%

15%

15%

28%

28%

27.5%

27%

25%

25%

31%

31%

30.5%

30%

28%

28%

36%

35.5%

35%

33%

33%

39.6%

39.1%

38.6%

35%

35%

Your tax bracket depends on your

income and your filing status

. 1993 saw a tax hike on the wealthy (via two new brackets), and then 2001 through 2003 saw a series of tax cuts that lowered some of the tax brackets.

Federal Tax Brackets

Slide26

If Taxable Income Is:

The Tax Is:

over $8,50010% of the taxable incomeOver $8,500 but not over $34,500$850 plus 15% of the excess over $8,500Over $34,500 but not over $82,250$4,750 plus 25% of the excess over $34,500Over $

82,250

but not over $174,400

$17,025 plus 28% of the excess over $83,600

Over $174,400 but not over $379,150

$42,449 plus 33% of the excess over $174,400

Over $379,150

$110,016.50 plus 35% of the excess over $379,150

Standard deduction

$5,800

Slide27

To take an example, suppose your taxable income (after deductions and exemptions) was exactly $100,000 in

2011

and your status was Single, then your tax would be calculated like this:

($ 8,500   minus  

0 )

  x .10 :

$   850.00

(you are taxed 10% on the first $8,350 of your earnings)

(34,500   minus  

8,500 )

  x .15 :

$3,900.00

(you are taxed 15% on earnings between $34,500 and $8,500)

(82,250   minus  

34,500 )

  x .25 :

$11,938.00

(100,000   minus  

82,250 )

  x .28 :

$4,970.00

    Total:

  $ 21,703.00

This puts you in the

28%

tax bracket since that's the highest rate applied to any of your income.

Even though you are in the 28% tax bracket, you did not have

all

your income taxed at 28%, as you can see by this example.

Slide28

Federal Income (Withholding) Tax

Federal Income (Withholding) Tax

The amount required by law for employers to withhold from earned wages to pay taxesThe amount of money deducted depends on the amount earned and information provided on the Form W-4

Slide29

Question:How does my employer figure out how much to take out of each of my paychecks for Federal taxes?

Answer:

There are two main methods:1. Tax charts2. Percentage method

Slide30

Using Tax Charts to Calculate Federal Withholding

You have a copy of tax charts in the back of your book on pages A4 and A5

These may not be exact so please do not use them to calculate your own federal taxesI will give you a handout also to eliminate flipping to the back of your book while doing your class workUse the tax charts given to you to find the answers to the following examples. Be sure to note that there are different charts for single and married persons

Slide31

Example 1:Carla’s gross pay for this week is $425.88. She is married and claims 2 allowances—herself and her husband. What amount will be withheld from her pay for Federal Income Taxes?

Find the income range from the table for Married Persons

weekly

payroll period. (Appendix A4-A5 or handout)

Income range:

420-430

Find the column for 2 allowances.

The amount of income to be withheld is

$14.

Slide32

Example 2:

Lance’s gross pay for this week is $460.00. He is single and claims one allowance. What amount will be withheld from Lance’s pay for FIT?

Find the income range from the table for Single Persons weekly payroll period.Income range: 460-470

Find the column for 1 allowance.

The amount of income to be withheld is

$45

Slide33

Complete the examples on your notes.

How much is withheld from the weekly wage of a married person earning $297 with 1 withholding allowance?

$8How much is withheld from the weekly wage of a married person earning $379 with 2 allowances?$9How much is withheld from the weekly wage of a single person earning $238 with no allowances?$20How much is withheld from the weekly wage of a single person earning $318 with 5 allowances?$0

Slide34

Assignment:

Section 2.1, p. 131

Problems 5 -12

Slide35

Closure:

What do you think

about the “ fair tax” ?

Slide36


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