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Payroll Taxes & W-4s. Why do we pay taxes? Roads, Operation of Government, Schools, Welfare, Police, etc… The money for these has to come from somewhere!!!. Federal Taxes  These go to the U.S. Government State and Local Taxes

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Presentation Transcript
slide2
Why do we pay taxes?
  • Roads, Operation of Government, Schools, Welfare, Police, etc…
  • The money for these has to come from somewhere!!!
slide3
Federal Taxes

 These go to the U.S. Government

  • State and Local Taxes

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

slide4
All of the money you make is taxed.
  • Employers don’t give you all of your money.
  • They hold some for the following:
    • Payroll Taxes.
    • Federal Income Taxes
payroll taxes
Payroll 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.
payroll taxes1
Payroll Taxes
  • 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
income taxes
Income Taxes
  • 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 taxes1
Income Taxes
  • 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.
income taxes2
Income Taxes
  • 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.
income taxes3
Income Taxes
  • 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!
slide12
Gross Pay – What you earn.
  • 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
slide13
Rule of Thumb:
  • Plan on taking home less than ¾ of your salary!