Payroll Taxes & W-4s - PowerPoint PPT Presentation

Payroll Taxes&W-4s

• Roads, Operation of Government, Schools, Welfare, Police, etc…
• The money for these has to come from somewhere!!!

 These go to the U.S. Government

• State and Local Taxes

 These go to the state, city, and ward in which you live.

• Employers don’t give you all of your money.
• They hold some for the following:
• Payroll Taxes.
• Federal Income Taxes

• Payroll Taxes:
• Social Security Tax
• S.S. gives people over 65 retirement money.
• S.S. helps disabled people who can’t work.
• Medicare Tax
• Medicare helps people 65 and older with medical problems.

• 2006 Payroll Tax Rates:
• Social Security: 6.20%
• Medicare: 1.45%
• If you make $10,000:
• SS: $10,000 * 6.20 % = $620
• Medicare: $10,000 * 1.45% = $145

• Federal Income Taxes:
• Pays for National Defense
• Pays for Law Enforcement
• Helps pay off the National Debt
• Pays for National Parks
• Helps Veterans
• And much more!

• Income Taxes are based on information you put on a W4 form.
• What is a W4 form?
• Whenever someone hires you, they will give you a W-4 to fill out.
• Employers use the information on that form to figure our how much money to withhold for income tax.
• The W4 form will ask how many allowances you have.

• What is an allowance?
• You do not have to pay all of your income taxes right away.
• You can pay all your taxes in April if you want.
• An allowance “allows” you a break on your taxes or the chance to pay your tax at a later date. This way, you don’t have as much tax taken out of your weekly paycheck.

• But be careful!!! You will still have to pay those taxes at a later date!
• 0 Allowances  The government holds as much as it can. You will probably be given a refund at the end of the year.
• 1 Allowance  Most people choose 1 allowance. They will normally not owe any tax at the end of the year.
• Taxes change each year, and sometimes the government will withhold too much. In this case you get a refund!

• Net Pay – What you take home after your taxes are taken out.
• Gross Pay – (Payroll Tax + Income Tax) = Net Pay
• $10,000 - ( (625 + 145) + 2200) = $7030

• Plan on taking home less than ¾ of your salary!