Independent Living October 12, 2015

Payroll Taxes

https://www.youtube.com/watch?v=whf3S85q0bk

First: A video from “FRIENDS”

Gross Pay vs Net PayExplain why someone earns $100 for work,

but receives check for less than $100?

Gross Pay:

Gross pay is the amount of money you earn before taxes

Net Pay:

Net pay is the amount of money you are owed after taxes are withdrawnGross Pay - Other Withholdings - Taxes = Net Pay

***Other Withholdings will always be deducted before taxes***

Social Security Tax includes:◦ Retirement benefits◦ Benefits for dependents ◦ Benefits for disabled and

parents

AKA: Federal Insurance Contributions Act (FICA)

Using Payroll TaxesTax Type Tax Rate

Social Security (FICA) 6.20%

Medicare 1.45%

Total Payroll Taxes 7.65%

Using Payroll TaxesTax Type Tax Rate

Social Security (FICA) 6.20%

Medicare 1.45%

Total Payroll Taxes 7.65%

Medicare Taxes includes:◦ Provides benefits for certain

individuals when they reach age 65

An Employee earns $1,000 in a pay period.Using the tax table, what

are the payroll taxes?◦ FICA = $62.00◦ Medicare = $14.50

How much is the employee’s Net Pay?◦ 1,000 – 76.50 = $923.50

Example:Tax Type Tax Rate

Social Security (FICA) 6.20%

Medicare 1.45%

Total Payroll Taxes 7.65%

Income TaxEmployers calculate

income tax for you◦ Use W-4 forms

Income tax depends on multiple things◦ What state you live in◦ Income bracket you fall in

A single employee earns $4,000 in a pay period.Using the tax tables, what

are the taxes being paid?◦ FICA = $248◦ Medicare = $58◦ Federal Income Tax= $400

How much is the employee’s Net Pay?◦ $4,000-$706= $3,294

Example:Tax Type Tax Rate

Social Security (FICA) 6.20%

Medicare 1.45%

Total Payroll Taxes 7.65%

Income Tax Provides:Income taxes help pay for:

◦National defense, vets, and foreign affairs◦Social Programs◦Physical, human, and community development

◦Law enforcement◦Interest on national debt

Video Explanationhttps://www.youtube.com/watch?

v=f_c_OsHlCL8

TaskComplete the assignment numbers 1-10On all math problems, YOU MUST SHOW ALL

WORKDue tomorrow beginning of class!