Paychecks Personal Finance
Dependent care account
(DCA) childcare
How to calculate net pay
1) calculate gross pay 2) calculate pre tax deductions 3) gross minus pre taxes 4) calculate payroll taxes on adjusted income 5) deduct other things ex. gym membership
payroll deductions
1) fit-federal income tax 2) sit- state income tax 3) social security- 6.2% out of paycheck 4) medicare- 1.45% out of paycheck
How is gross pay calculated
1) hours times hourly wage 2) salary/# of pay periods
What percentage of gross income is deducted for medicare?
1.45%
monthly
12 paychecks
semimonthly (twice a month)
24 paychecks
biweekly
26 paychecks
Percentage of taxes taken from paychecks
31%
What percent of a person's paycheck is deducted
33%
regular hours in a work week
40
weekly
52 paychecks
FICA
Federal insurance contributions act: social security and medicare deductions
What does the W4 determine
Filled out and given to you by employers to determine the amount of taxes you pay. - You fill out how many allowances (tax breaks) you will have on this
Unearned income
Savings account, dividends from stocks, assets
Does employer match social security and medicare?
Yes
What is a dependent
a non-tax payer, someone that relies on taxpayer/person getting paycheck for financial support
How are federal taxes determined
by income + what you file on W4
What services are provided by the Internal Revenue Service
collect taxes, enforce tax laws
4 different types of taxes
income (taxes on income), x size ( ), property (if you own something), sales (on what you buy)
4 sources of income
investment, interest, employment, entrepreneurship
pay period
length of time for which an employees wages are calculated
What documentation must be provided to complete a form I-9
license, birth certificate, passport, military id
MRA
medical reimbursement account ex. contacts, sun tan lotion
Three methods employers use to pay employees
paycheck, direct deposit, payroll card
direct deposit pros and cons
pros- increased security, you know when paycheck will be deposited, employee can view paycheck stub to see deduction.
paycheck pros and cons
pros-employee may choose what to do with each paycheck, deductions are clearly identified on paycheck stub cons- least secure, might get lost, cost more for employers to print paychecks
payroll card pros and cons
pros-safer than carrying around cash, can review paycheck stubs cons-employees must be careful of fees charged by payroll cards
Earned income
regular salary, wages, commission, tips, bonuses, tax refunds
Who receives social security?
retirees, disabled, child under 18 who lost parents, window w/ kids
what do taxes provide citizens?
schools, public departments
what does social security fund
unemployment, retirement, disability insurance
allowances
used to determine amount of federal taxes withheld from the paycheck
What two forms must an employee complete when beginning a new job?
w4, I-9
Pay periods
weekly, bi-weekly, twice a month, monthly