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Income and Taxes. Lawns R Us @2008 Oklahoma State Department of Education. Objectives. Identify the different kinds of payroll deductions. Explain the difference between gross and net income. Find the net income. Income.

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income and taxes

Income and Taxes

Lawns R Us

@2008 Oklahoma State Department of Education.

objectives
Objectives
  • Identify the different kinds of payroll deductions.
  • Explain the difference between gross and net income.
  • Find the net income.
income
Income
  • Gross Income: wages or salary before deductions for taxes and other purposes.
  • Net Income: commonly called “take home pay”; it is your income after all deductions and exemptions.
paycheck deductions
Paycheck Deductions
  • Deduction: anything that is subtracted from the gross amount. Can either be voluntary or required.
    • Taxes: state and federal (required)
    • Insurance: health, life, or dental
    • Stock purchases
    • Meals or uniforms
    • Retirement
    • Other ideas?
paycheck exemptions
Paycheck Exemptions
  • Exemption: Legal allowances that reduce the amount of income taxes subtracted from your gross income.
    • You fill out a form when you are hired. You can have federal withholding allowances for yourself, your spouse, and your dependents.
payroll taxes
Payroll Taxes
  • FICA (another name for Social Security) stands for Federal Insurance Contributions Act that covers both Social Security and Medicare.
    • Federal programs providing benefits for people who are retired, disabled, or children or deceased workers.
    • Any business with more than 1 employee must pay FICA (employer pays ½ and employee pays ½.)
state federal taxes
State & Federal Taxes
  • Actual amount of income tax taken out each month depends on a person’s income. Employers use information called “tax tables.”
    • State payroll taxes vary greatly from state to state, but federal tax rates are the same for everyone living in the United States.
why taxes
Why Taxes?
  • Paying taxes is a part of the responsibility of earning an incomes.
  • Taxes are used to support a variety of programs, such as schools, national defense, and public welfare.
  • We all enjoy the benefits from taxes.
complete wksht 1 2 and activity 1 2 1
Complete Wksht 1.2 and Activity 1.2.1
  • Answer all of the questions on the worksheet!
answers to lesson 1 2
Answers to Lesson 1.2
  • 1. The difference between gross and net income is gross income is salary before deductions and net income is your income after all deductions and exemptions.
answers to lesson 1 21
Answers to Lesson 1.2
  • 2. Some of the different kinds of deductions that an employer may deduct are:
    • State Taxes (required)
    • Federal Taxes (required)
    • FICA (required)
    • Retirement (optional)
    • Uniforms, meals, stock purchases (optional)
    • What else?
answers to lesson 1 22
Answers to Lesson 1.2
  • 3. What is net pay?
    • A. The amount of money left after all deductions have been taken.
  • 4. What 2 taxes are included within the Federal Insurance Contribution Act (FICA)?
    • B. Social Security & Medicare.
paycheck deductions activity 1 2 1
Paycheck Deductions – Activity 1.2.1
  • 1. The employer is Lawns R Us.
  • 2. Zooma earned $294 before deductions.
  • 3. Zooma’s hourly wage is $240/40hours, is $6 an hour.
  • 4. Zooma’s deductions are: income tax, state tax, FICA, and meals.
paycheck deductions activity 1 2 11
Paycheck Deductions – Activity 1.2.1
  • 5. Divide Zooma’s net pay by her gross is pay $223.43/$294.00 = .76, which is 76%.
  • 6. To find the percent divide the tax by her gross pay
    • Federal Tax: $42.65/$294.00 = .145, which is 14.5%.
    • State Tax: $8.67/$294.00 = .0295, which is 2.95%.
    • FICA: $16.25/$294.00 = .055, which is 5.53%
paycheck deductions activity 1 2 12
Paycheck Deductions – Activity 1.2.1
  • 7. The pay period is between 8-6 to 8-12.
  • 8. $372.01 is the income tax that has been taken out of Jennifer’s paycheck so far this year.
  • 9. Jennifer contributed $5 to a retirement plan this paycheck.
  • 10. Jennifer’s take-home pay was $296.26.
paycheck deductions activity 1 2 13
Paycheck Deductions – Activity 1.2.1
  • 11. To find the percent of Jennifer’s take-home pay divide her net pay by her gross pay, $296.26/$374.00, which is .792 or 79.2%.
  • 12. To find the percent divide the tax by her gross pay
    • Federal Tax: $30.75/$374.00 = .0822, which is 8.22%.
    • State Tax: $9.50/$374.00 = .0254, which is 2.54%.
    • FICA: $22.49/$374.00 = .0601, which is 6.01%
summary
Summary
  • You should now know
    • The difference between net and gross pay
    • The difference between deductions and exemptions
    • The different types of payroll deductions
    • How to find the percent of net pay
    • How to find the percent of federal tax, state tax, and FICA.
resources
Resources
  • Entire Lesson plan:
    • http://sde.state.ok.us/curriculum/PFLP/Student/Standard_1/module_1.2.pdf
  • Basic information on Payroll taxes:
    • http://taxes.about.com/od/payroll/qt/payroll_basics.htm
  • Internal Revenue Service
    • http://www.irs.gov/