Personal Finance

FICA

(Federal Insurance Contribution Act) - requiring employees and employers fund SS and Medicare

percentages SUI/SDI SS Medicare State income tax

,705% 6.2% 1.45% 2%

deductions

Amounts subtracted from your gross pay

comission and ex

Compensation in the form of a percentage of total sales. Car salesman sells a $40,000 car, his commission is 2%, so he banks $800.

what is compensation? hourly wage? salaried?

Compensation- salary, wage, pay, or benefits received from performing a service Hourly Wage- hourly rate paid for each hour worked Salaried- employee who is paid yearly or monthly. Usually not OT eligible

straight time

First 40 hours worked per week

W4 Form

Form W-4 asks for your name, address, Social Security number, marital status, and the number of exemptions you are claiming for income tax purposes.

equation for net pay

Gross Pay - Deductions = Net Pay

factors determining withholding tax

Marital status Number of allowances Number of pay periods Annual salary

social security benefits

Old age retirement income (OA) Survivorship income (S) Disability income (D) Health insurance (HI)

tax philosiphies

Progressive taxes - take a larger share of income as the amount of income grows. (income tax) Regressive taxes - take a smaller share of income as the amount of income grows. (sales tax) Proportional taxes - taxes for which the rate stays the same, regardless of income. (property tax)

gross pay equation

Regular Pay + Overtime Pay = Gross Pay

4 common pay periods

Semimonthly (Twice a month) 24 Monthly 12 Biweekly (Every two weeks) 26 Weekly 52

reg deduction example optional deduction example

Social Security tax and federal income tax, are required by law. percent of pay placed into retirement account

net pay

When all deductions are taken out of your gross pay, the amount left

gross income earned income unearned income

all the taxable income you receive. money you earned from working. money earned from passive actions

exempt status

available only to people who will not earn enough in the year to owe any federal income tax.

piecework and ex and equation

compensation based on the number of pieces completed during a pay period Blue jean factory worker is paid 25 cents for each leather patch she sewed satisfactorily on the back of jeans. Number of pieces produced x Piece rate = Gross Pay

Social Security act medicare provision

established a national social insurance program that provides federal aid for the elderly and for disabled workers. provides hospital and medical insurance for those 65 and older.

3 federal deductions

federal income tax - calculated based on earnings, marital status, and # of dependents social security- provides retirement income, disability income, and income to surviving spouse for child care medicare - medical insurance for people collecting social security (1.45% of gross, no max)

what does info from w4 form determine

info determines the amount your employer will withhold from your paycheck for income taxes.

minimum wage

lowest wage that an employer may pay an employee as established by law. (7.25) 8.60 in NJ

dependent

person who lives with you and for whom you pay more than half his or her living expenses.

allowances

reductions in the amount of tax withheld from your paycheck. Allowances do not lower your taxable income.

fair labor standards act

requires hourly workers to be paid "overtime wages" of 1½ times their hourly rate for hours worked beyond 40 per week. also known as the Wage and Hour Act, establishes a minimum wage.

state specific deductions

state income tax - Tax imposed on the employee's gross earnings SUI/SDI - state unemployment insurance and state disability insurance totaling 0.705% of gross income; income cap on employee tax liability is $33,700

W-2 Form

summary of the income you earned during the year and all amounts the employer withheld for taxes. employers sends a copy of W-2 to the gov and provides one from previous tax year no later than January 31 of the current year.

whats overtime double time and overtime rate

time worked beyond the regular hours. Overtime rate is 1½ times the regular rate. double time equlas reg wage x2

gross pay

total amount you earn before any deductions are subtracted.