fin lit ch 2

salary -

- compensation received by an employee for services performed. A salary is a fixed sum paid for a specific period of time worked, such as weekly or monthly.

Teens and Income Taxes The five most significant things your teen needs to know

1. Minors Pay Taxes 2. Teens Need to Complete a W-4 3. Teens May Need to File Taxes for Unearned Income 4. Unofficial Jobs Still Count as Income 5. Tax Money Is Used by the Government

during the interview

1. Relax. Be yourself. 2. Answer questions completely and calmly. 3. Ask questions to help you better know the organization. 4. Ask when you might hear from the organization.

before the interview

1. Research the organization. 2. Practice your interviewing skills. 3. Prepare questions that you plan to ask. 4. Prepare proper dress and grooming. 5. Plan to arrive early at the interview.

following are some questions commonly asked at job interviews:

1. What activities have helped you expand your interests, abilities, and knowledge? 2. In what types of situations have you done your best work? 3. Describe the supervisors who motivated you the most. 4. Describe someone with whom you had difficulty working. 5. What are your major strengths? 6. What are your weaknesses? What have you done to overcome your weaknesses? 7. What do you know about our organization? 8. Who is someone you admire? Why do you admire that person?

after the interview

1. Write down notes on how you can improve for your next interview. 2. Promptly send a thank-you letter to the person with whom you interviewed to express your appreciation for the opportunity to meet with them.

Tax-free and tax-deferred benefits

The U.S. federal government provides numerous plans that allow an employee to save for certain life events with pre-tax dollars. These savings plans allow a person to invest in their retirement, health care, childcare, and many other life events and receive a tax reduction or pay no tax at all on the money saved. Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), 401(k) retirement plans, and many other "cafeteria plans" are examples of tax-advantaged benefits. When you sign up for one of these plans, your savings contribution is automatically deducted from your paycheck before your taxes are calculated, which allows you substantial tax savings and will show up as a line item on your pay stub reflecting an adjustment to your taxable income.

commission -

compensation received by an employee for services performed. Commissions are paid based on a percentage of sales made or a fixed amount per sale.

wages

compensation received by employees for services performed. Usually, wages are computed by multiplying an hourly pay rate by the number of hours worked.

payroll taxes -

include Social Security and Medicare taxes. Total payroll taxes 7.65%

Federal Income Tax

is a progressive tax. A progressive tax is a type of tax where the effective tax rate (the tax amount expressed as a percentage) increases as the amount to which the rate is applied (a person's adjusted income) increases. Every year, the U.S. Federal Government changes the tax rates and income brackets. See the chart below for an example from 2008.

tip income

money and goods received for services performed by food servers, baggage handlers, hairdressers, and others. Tips go beyond the stated amount of the bill and are given voluntarily. Tips are received as gratuities by food servers, baggage handlers, hairdressers, and others for services performed. Tips go beyond the stated amount of the bill and are given voluntarily. Employee compensation and tips may be in the form of cash, goods and services, awards, and taxable benefits.

Whether you are seeking your first job, or considering changing to a different field, you must take various actions to obtain a job.

phase 1: Assess your personal interest, abilities, and career goals. phase 2: Evaluate the current employment market. phase 3: Identify specific job opportunities. phase 4: Apply for employment positions with the use of a resume or application letter. phase 5: Interview for available positions. phase 6: Obtain additional career training.

Social Security tax -

provides benefits for retired workers and their dependents as well as for the disabled and their dependents. Also known as the Federal Insurance Contributions Act (FICA) tax. provides the following benefits for employees and their dependents: Retirement benefits Benefits for the dependents of retired workers Benefits for the disabled and their dependents tax rate 6.20% -- There is a maximum annual amount of Social Security tax withheld per employee. Social Security taxes are not withheld on amounts over the earnings limit. For 2014, the earnings limit was $117,000, and the maximum Social Security tax was $7,254 ($117,000 x 6.2%). There is no limit on the amount of wages subject to Medicare tax.

A progressive tax

type of tax where the effective tax rate (the tax amount expressed as a percentage) increases as the amount to which the rate is applied (a person's adjusted income) increases.

Medicare tax -

used to provide medical benefits for certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65. tax rate 1.45%

W-4 Form

Employees complete Form W-4, Employee's Withholding Allowance Certificate to determine how much federal income tax to withhold. The amount of federal income tax withholding depends on the employee's marital status, the number of withholding allowances claimed by the employee, any additional amount the employee wants to withhold, and any exemptions from withholding that the employee claims.

process of payroll taxes and income tax withholding.

Employers withhold payroll taxes and income tax from employees' pay. Employers send the amounts withheld to the federal government. Employees complete Form W-4. Employers use Form W-4 to determine how much income tax to withhold from employee pay. Taxpayers need to report all taxable income, even if it does not appear on Form W-2.

gross vs net pay

Gross pay is the amount the employee earns. Net pay, or take-home pay, is the amount the employee receives after deductions. The difference between gross pay and net pay is: Social Security taxes Medicare taxes income tax withheld other amounts withheld

benefits cost your employer, on average, an extra 33% - 50% of your pay. These may include:

Health, dental, and eye care insurance Life insurance/disability insurance Flexible spending account Health savings account Tax-deferred retirement plan Paid vacation Paid holidays Parental leave Stock purchase plan Employee assistance plans Employee fitness programs Employee discounts Tuition assistance or reimbursement KNOW WHAT THESE ARE

Federal income taxes finance:

National defense, veterans, and foreign affairs Social programs Physical, human, and community development Law enforcement Interest on the national debt

State and local income taxes

The tax rate ranges from 0% to close to 10% depending on the state and town in which you live.

taxes in terms of wages...

Unless specifically excluded, all wages, salaries, commissions, and bonuses are taxable. All tip income is taxable and needs to be reported. Employers report wage and tax information on Form W-2, Wage and Tax Statement. Employees use Form W-2 to complete their individual income tax returns.

w-2 form

Wages, salaries, and tip income are reported on Form W-2, Wage and Tax Statement. Employers provide Form W-2 to the employee and to the federal government. Employees use Form W-2 to complete their tax returns. All wages, salaries, and tip income are taxable even if they are not reported on Form W-2.

wages and salaries

Wages, salaries, bonuses, and commissions are compensation received by employees for services performed.

Net Pay

Your net pay—often called your "take home pay"—is the remaining amount you get to keep after all deductions are removed from your gross (or total) pay.

Tax Tip Self-employed individuals

are not employees. Self-employment income is taxable, but it is not included with wage and tip income on the tax return.

bonus

compensation received by an employee for services performed. A bonus is given in addition to an employee's usual compensation.