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NET PAY

NET PAY. Chapter 2 Section 2-1. So where did all my $$$ go?. It disappeared because of DEDUCTIONS  Deductions are subtractions from gross pay Deduction examples: Income taxes (also called withholding taxes) include: Federal taxes State taxes Local taxes (county and city)

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NET PAY

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  1. NET PAY Chapter 2 Section 2-1

  2. So where did all my $$$ go? It disappeared because of DEDUCTIONS  • Deductions are subtractions from gross pay • Deduction examples: • Income taxes (also called withholding taxes) include: • Federal taxes • State taxes • Local taxes (county and city) • Social Security • Medicare These 2 together are known as the FICA tax!

  3. So how much $$$ is taken out by the federal government? • It all depends on 3 things: • How much $ you make • If you’re married or single • The # of withholding allowances claimed

  4. So what’s a withholding allowance? • A # that helps reduce the amount of tax withheld (taken out) from your check. You fill in this # on your W-4 form. • You can claim 1 withholding allowance for yourself, 1 for your husband/wife, and 1 for each kid or dependent…or none at all. • The IRS creates a table (it’s updated often) that tells how much they will take out of your check depending on the 3 factors above.

  5. How to Read a Withholding Table • Step 1: Are you single or married? You have to use the right table. • Step 2: Find your wages (how much you make) in the far left column of the table. • Step 3: Find the amount that’s directly across from you wage and straight down from your withholding allowance claimed.

  6. So what else gets deducted from my check? • Social Security & Medicare (aka FICA tax) • This covers government programs for the following types of benefits: • Disability—workers who are disabled and unable to work. • Medicare—provides hospital insurance for some disabled people and for people over 65. • Retirement—for people who are at least 62. • Survivors—paid to spouses and dependent children when a SS recipient dies.

  7. So how much does FICA take? • Currently 7.65 % (SS tax rate of 6.2% + Medicare of 1.45%) of your gross income is taken out for FICA. • The maximum gross pay that they can tax for SS (6.2%) is $102,000. So if you make more than that they can only make you pay social security on $102,000 of what you make. • All of your wages are taxable with Medicare at 1.45%. • FICA is automatically taken out of your check by your employer. They also have to pay a FICA tax equal to the FICA taxes taken out of their employees checks.

  8. Does anything else get deducted? • YES! • Health insurance • Life Insurance • Dental Insurance • Disability Insurance • Retirement • Union dues • And the list goes on, and on, and on…

  9. So how do I figure out how much $$$ I REALLY get to put in my pocket? • How much you put in your pocket= how much you really make per hour – all of your deductions • So…net pay=gross pay – deductions

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