Do Now…

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# Do Now… - PowerPoint PPT Presentation

Do Now…. Carl worked 12 hours for an hourly rate of \$7.50 The Federal Tax Rate is 20% The State Tax Rate is 10% FICA is always 7.65% What is Carl’s Net Pay?. Computer Whiz Carl works at Circuit City. I think I know, check my answer. Click here is your answer was correct.

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Presentation Transcript
Do Now…
• Carl worked 12 hours for an hourly rate of \$7.50
• The Federal Tax Rate is 20%
• The State Tax Rate is 10%
• FICA is always 7.65%
• What is Carl’s Net Pay?

Computer Whiz Carl works at Circuit City.

I think I know,

Oops, I guess I need help.

Carl’s Net Pay is \$56.11

Carl’s Net Pay

• Carl’s Gross Pay is \$90.00
• \$7.5 x 12 hours = \$90.00
• His Federal Tax Deduction is \$18.00
• \$90.00 x 20% = \$18.00
• His State Tax Deduction is \$9.00
• \$90.00 x 10% = \$9.00
• His FICA Deduction is \$6.89
• \$90.00 x 7.65% = \$6.89

\$90.00 - \$18.00 - \$9.00 - \$6.89 = \$56.11

Carl’s Net Pay is \$56.11

Money subtracted from your gross pay for taxes by the government, also called payroll taxes:

• Federal Taxes
• State Taxes
• FICA (Social Security and Medicare)

### REQUIRED DEDUCTIONS

NEXT

• Johnny’s Gross Pay is \$50.00
• Johnny’s Federal Tax Rate is 20%
• Johnny’s Federal Tax Deduction is \$10.00

### Calculating Federal Tax Deduction

\$50.00 x 20% = \$10.00

\$50.00 x .20 = \$10.00

Gross Pay x Federal Tax Rate = Federal Tax Deduction

I think I know,

The Federal Tax Rate is 20%

### Diligent David’s Gross Pay is \$48.00

What is David’s Federal Tax Deduction?

Show me how to determine David’s federal tax deduction

Oops, I guess I need help.

### David’s Federal Tax Deduction is

\$9.60

20% or .20 means

20¢ out of every dollar earned,

goes to Uncle Sam.

}

20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+

20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+

20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+

20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+

20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+

20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢+ 20¢

\$9.60

There are additional deductions to be subtracted from gross pay, let’s calculate State Taxes and FICA…

STATE TAXES

### REQUIRED DEDUCTIONS

• The amount subtracted from gross pay for taxes is determined by the state government.
• It is a percentage of gross pay based on a person’s total wages and living situation (married, single, children, etc.).
• The state tax deduction is calculated by multiplying the government determined tax rate by gross pay.

NEXT

### Calculating State Tax Deduction

• Johnny’s Gross Pay is \$50.00
• Johnny’s State Tax Rate is 15%
• Johnny’s State Tax Deduction is \$7.50

\$50.00 x 15% = \$7.50

\$50.00 x .15 = \$7.50

Gross Pay x State Tax Rate = State Tax Deduction

The State Tax Rate is 18%

### Diligent David’s Gross Pay is \$48.00

What is David’s State Tax Deduction?

I think I know,

Show me how to determine David’s state tax deduction

Oops, I guess I need help.

### David’s State Tax Deduction is

\$8.64

18% or .18 means

18¢ out of every dollar earned,

goes to Uncle Sam.

}

\$48.00 x 18%

OR

\$48.00 x .18

\$8.64

There is one more deduction to be subtracted from gross pay, let’s learn about FICA…

FICA

### REQUIRED DEDUCTIONS

• FICA stands for Federal Insurance Contributions Act. This law was created to pay for Social Security and Medicare.
• Social Security – Wages paid to retired people by the government based on how much they earned during their working years.
• Medicare – Government sponsored health insurance for retired people.

The amount subtracted from gross pay for FICA is always at a rate of 7.65% (6.2% for Social Security and 1.45% for Medicare)

### Calculating FICA Deduction

• Johnny’s Gross Pay is \$50.00
• The FICA Rate is 7.65%
• Johnny’s FICA Deduction is \$3.83

\$50.00 x 7.65% = \$3.83

\$50.00 x .0765 = \$3.83

Gross Pay x FICA Percentage = FICA Deduction

### Diligent David’s Gross Pay is \$48.00

What is David’s FICA Deduction?

I think I know,

Show me how to determine David’s FICA deduction

Oops, I guess I need help.

\$3.67

### David’s FICA Deduction is

After all these deductions, is there any money left for me?

\$48.00 x 7.65% = \$3.67

\$48.00 x .0765 = \$3.67

After all these deductions, is there any money left for me?

NET PAY = the money left after all deductions are subtracted from gross pay.

Calculating Net Pay:

the money after deductions, what you actually bring home…..

• Johnny’s Gross Pay is \$50.00
• Johnny’s Federal Tax Deduction is \$10.00
• Johnny’s State Tax Deduction is \$7.50
• Johnny’s FICA Deduction is \$3.83

\$50.00 - \$10.00 - \$7.50 - \$3.83 = \$28.67

Gross Pay - Federal, State and FICA Deductions = Net Pay

### What is Diligent David’s Net Pay?

• His Gross Pay is \$48.00
• His Federal Tax Deduction is \$9.60
• His State Tax Deduction is \$8.64
• His FICA Deduction is \$3.67

I think I know,

Show me how to determine David’s Net Pay

Oops, I guess I need help.

David’s Net Pay is \$26.09

He will have \$26.09 to spend after all required deductions have been subtracted from his gross pay.

NEXT

David’s Net Pay

• David’s Gross Pay is \$48.00
• \$8.00 x 6 hours = \$48.00
• His Federal Tax Deduction is \$9.60
• \$48.00 x 20% = \$9.60
• His State Tax Deduction is \$8.64
• \$48.00 x 18% = \$8.64
• His FICA Deduction is \$3.67
• \$48.00 x 7.65% = \$3.67

Gross Pay - Federal Tax - State Tax - FICA = Net Pay

\$48.00 - \$9.60 - \$8.64 - \$3.67 = \$26.09

David’s Net Pay =

\$26.09