Consumer Math Class East Jackson High School 2016 Module 1 Payroll Taxes and Federal Income Tax Withholding Introduction Payroll taxes include the Social Security tax and the Medicare tax ID: 515561
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Slide1
Tax Unit: Module 1
Consumer Math Class
East Jackson High School
2016Slide2
Module 1:
Payroll Taxes and Federal Income Tax Withholding
Introduction
Payroll taxes include the Social Security tax and the Medicare tax.The Medicare tax is used to provide medical benefits for certain individuals when they reach age 65.Federal income taxes are used to provide for national programs.Slide3
Do you need to file?Slide4
Do you need to file?Slide5
Do you need to file?Slide6
Social Security Tax
The
Social Security tax
is also called the FICA (Federal Insurance Contributions Act) tax.Social Security taxes provide the following:Retirement benefitsBenefits for the dependents of retired workersBenefits for the disabled and their dependentsSlide7
Medicare Tax
Provides medical benefits for certain individuals when they reach 65.
Individuals eligible:
workersretired workersspouses of workers and retired workersSlide8
Federal income taxes finance:
National defense, veterans, and foreign affairs
Social programs
Physical, human, and community developmentLaw enforcementInterest on the national debtSlide9
Gross Pay and Net Pay
Gross pay
=
the total amount an employee earnsNet pay (Take-home pay) = amount the employee receives after money has been withheld for:Social Security taxesMedicare taxesIncome tax (Federal, State, and/or City)Other withholdings
Employers send the withheld taxes to the taxing authorities.Slide10
Payroll Taxes
2015
Payroll Tax Rates
Social Security tax rate 6.20%Medicare tax rate 1.45%Total payroll taxes 7.65%There is a maximum annual amount of Social Security tax withheld per employee. Social Security taxes are not withheld on amounts over the earnings limit. For 2014, the earnings limit was $118,500, and the maximum Social Security tax was $
7,347
($
118,500
x 6.2%). There is no limit on the amount of wages subject to Medicare tax.Slide11
Form W-4
Employees complete
Form W-4
, Employee’s Withholding Allowance Certificate.Employers use Form W-4 to determine how much federal income tax to withhold.Slide12
Withholdings depend on:
The employee’s marital status
The number of withholding allowances claimed by the employee.
The more allowances, the less $ withheld.Any additional amount the employee wants to withholdAny exemptions from withholding that the employee claims.Slide13
Example W-4 Slide14
Example
Angela
Viviano
earns $2,000 a month as a physical therapist’s assistant. Angela’s net pay is calculated as follows:Gross Pay $2,000 Social Security (6.2%) -$124 Medicare (1.45%) -$29
Income Tax (per W-4) -$237
Retirement -$50
Net Pay $1,576
Her employer sends $390 ($124 + $29 + $237) to the federal government and $50 to the retirement fund.Slide15
Quick Check!
____1. Which tax provides for medical benefits?
a. FICA tax
b. Federal income tax c. Social Security tax d. Medicare tax
____2. How much income tax do employers withhold from employee pay?
a. 6.2% of gross pay
b. 1.45% of gross pay
c. 7.65% of gross pay
d. Employers use the information on Form W-4
to compute income tax withholding.
____3. Net pay
a. is more than gross pay.
b. is also known as take-home pay.
c. is gross pay minus 7.65%
d. depends on how much the employee wants to pay in Social Security
taxes.Slide16
Who completed Form W-4? _______________
____2. Is the taxpayer married or single?
a. Married
b. Single c. Divorced d. Widowed
How many allowances does the taxpayer claim? _____
How much additional tax does the taxpayer want to be withheld? _________
Ahmed Khan
b
3
50Slide17
Review Questions
____1. Employees decide when to pay their payroll taxes.
a. True
b. False____2. Federal income taxes are used to pay the interest on the national debt.
a. True
b. False
____3. In
2015,
the Medicare tax rate was 1.45% of gross pay.
a. True
b. False
____4. Employees use Form W-4 to prove that they are eligible to work in the United States.
a. True
b. FalseSlide18
Simulation for Module 1
Learn how to complete a Form W-4
Your name is Lawrence Red Owl.
You have just recently graduated from college with a marketing degree. On the 1st of next month you will start your new job as manager of a clothing store in a mall.
You will get a weekly salary plus a bonus based on the store’s sales.Slide19
Use the following information to fill out the Form W-4 given in your packet.
Marital Status: Single
Children: None
U.S. citizen: YesDependents other than above: NoneSocial Security Number: 512-00-2213Address:
5022 Oak Tree Dr.
Anytown, US 00001Slide20Slide21
Congratulations!
You’ve just finished Module 1!
All information came from the Internal Revenue Service Understanding Taxes Program
http://www.irs.gov/app/understandingTaxes