Paycheck Basics

1. Paycheck Basics

2. For many it’s the first paycheck. What’s the best part about having your first job? Before payment occurs there are steps to complete. What do you plan to do with your first big paycheck?

3. W-4 Must be completed To receive a paycheck, an employee must: Complete a Form W-4 • Employee’s Withholding Allowance Certificate • Determines the amount of money withheld for taxes

4. Required charges of citizens by local, state and federal governments What are taxes? What are examples of goods and services that are paid for with taxes? Provide public goods and services.

5. I-9 must be completed What forms of ID do you have to complete the I-9? Completing a Form I-9 • Used to prove citizenship • Must provide at least 2 of the following • passport • driver’s license • U.S. military card • Social Security card • birth certificate

6. W-2 is completed at the end of the tax year How many businesses in our community advertise to help with this process? Form W-2 (Wage and Tax Statement) • States the amount of money earned and taxes paid throughout the previous year • Used to file income taxes by April 15th • Individuals may be exempt from filing federal withholdings if they make less than a certain amount per year

7. Methods for Paying Employees

8. Paycheck Pros and Cons Pros Cons • Touch and feel the payment • Employee controls when it is deposited • Least secure method • Employee responsible to get it to the bank • Fees may apply if a person is unbanked

9. Direct Deposit Pros and Cons Pros Cons • No direct handling of check • Won’t get lost • Employee knows exactly when money will be in account • No direct handling of the check • Must check online for accuracy of paycheck stub

10. Payroll Card Pros and Cons Pros Cons • No direct handling of check • Wages automatically loaded on card • Works like a debit card • Card could be lost • Fees may be charged

11. Reading a Paycheck Stub Personal Information: Name, SSN or Employee Number & Address

12. Most businesses pay employees either weekly, bi-weekly, or monthly

13. Reading a Paycheck Stub Pay Period: The length of time for which an employee earns wages

14. Reading a Paycheck Stub Gross Income: Thetotal amount of money earned before payroll withholdings

15. If a person earns an hourly wage, gross income is calculated by multiplying the number of hours worked by the wage Number of hours worked Wage What is the gross income if an employee works 15 hours at an hourly wage of $9.50? Gross Income

16. Reading a Paycheck Stub • Payroll Deductions: • Items deducted from gross pay. Typically around 30%. • Typically include: • Federal withholding • State withholding • FICA

17. Reading a Paycheck Stub Deductions this pay period Accumulated deductions for the year

18. Payroll Deductions • Withholding Tax – The amount required by law for employers to withhold from earned wages to pay taxes • FICA-Federal Insurance Contribution Act • Fed OASDI/EE (Federal Old Age Survivors Disability Insurance Employee Employment Tax) or Social Security - helps provide retirement income for the elderly and pays disability benefits • Fed MED/EE (Federal Medicare Employee Employment Tax) or Medicare - health care program for the elderly and disabled

19. Reading a Paycheck Stub Net Income: The check amount that is often referred to as the take home pay.

20. The amount left after all payroll deductions have been taken from gross income Net Income Often referred to as “take home” pay

21. Net Income • Gross Income $180.00 • Payroll Withholdings: • Federal Withholding Tax $14.10 • State Withholding Tax $5.45 • FICA $13.77 • What is her Net Income? Payroll Withholdings Net Income $180.00 – ($14.10 + $5.45 + $13.77) = $146.68

22. Review each pay period • It is important to review each paycheck stub to identify any possible mistakes! • If a mistake is found, contact the employer immediately

23. Questions?