how much are you really making? "certain materials are included under the fair use exemption of...

How Much Are You Really Making?

"Certain materials are included under the fair use exemption of the U.S. Copyright Law and have been prepared according to the

multimedia fair use guidelines and are restricted from further use."

Jeanne Dompierre, Michelle Haugan, Leah Lencowski

ECOMP 5007

October 10, 2004

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This presentation will help you to• understand the difference between gross and net pay

• accurately calculate gross pay required deductions and net pay

Materials Needed

• Pencil• Scratch Paper• Calculator• One CLEAN sheet of

paper that will be turned into your teacher at the end of the presentation

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How Much Money Do You Actually Take Home When

you Work?

Calculating Gross and Net Pay

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To earn money, you first need to:

GET A JOBand

AGREE TO A WAGE!

WAGE:

The amount of money you will be paid for working.

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WAGES can be paid:

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HOURLY

SALARIED

An agreed upon rate per hour.

OVERTIME – after 40 hours, one and one-half times the regular pay.

An agreed upon rate, usually not paid for overtime.

Expected to work a 40-hour standard work week. More if necessary without extra pay.

WAGES can be paid:

• Per Hour – Hourly Rate

• Per Week – Weekly Rate

• Per Month – Monthly Rate

•Bi-Monthly – 2 x per Month

•Bi-weekly – Every 2 weeks

• Per Year – Yearly Rate

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HOURLY

SALARIED

Johnny Gets Paid an Hourly Rateof $10.00

Johnny earns

10.00 Each hour

he is at work

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How Much Does Johnny Earn if he works for 5

hours?

10.00

HOURS X HOURLY RATENEXT

Johnny Earns $50.00

10.00

5 X $10.00 = $50.00

HOURS X HOURLY RATE

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Johnny’s GROSS PAY is $50.00

GROSS PAY is:

Total money earned for time worked.

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Stressed-out Susie earns $5.00 per hour

What is Susie’s Gross Pay if she works for 7 hours? I think I know,

Check my Answer

Show me how to determine Susie’s Gross Pay

I think I know,

Check my Answer

Susie’s Gross Pay is:

$35.00

Oops, I guess I need help.

Click here.

Click Here if your answer was correct.

Susie Earned $35.00

5.00

7 X $5.00 = $35.00

HOURS X HOURLY RATE

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Diligent David earns $8.00 per hour delivering the

mail What is David’s

Gross Pay if he works for 46

hours?

I think I know,

Check my Answer

Show me how to determine David’s Gross Pay

David’s Gross Pay is

$392.00

Click here is your answer was correct.


Click here.

David Earned $392.00

8.00

12.00

$320.0040 HRS

6 HRS.

X

X

=

NEXT

= $ 72.00

OVERTIME RATE = REGULAR RATE X 1.5

$8.00 x 1.5 = $12.00

GROSS PAY $392.00

What if Diligent David is a salaried employee and his gross pay is

$30,000 annually.

What is David’s Gross Pay if he is

paid weekly?

I think I know,

Check my Answer


David’s Weekly Gross Pay is

$576.92



Click here.

David Earned $576.92 weekly

$576.92=

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$30,000 ÷ 52 weeks


$30,000 annually.

What is David’s Gross Pay if he is

paid monthly?

I think I know,

Check my Answer


David’s Monthly Gross Pay is

$2500



Click here.

David Earned $2500.00 monthly

$2500.00

=

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$30,000 ÷ 12 months


$30,000 annually. What is David’s Gross Pay if he is

paid Bi-monthly?

I think I know,

Check my Answer


David’s Bi-Monthly Gross Pay is

$1250.00



Click here.


$1250.00

=

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$30,000 ÷ 24 (12 months x 2)


$30,000 annually.

What is David’s Gross Pay if he is paid Bi-weekly?

I think I know,

Check my Answer


David’s Bi-Weekly Gross Pay is

$1153.85



Click here.


$1153.85

=

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$30,000 ÷ 26 (52 weeks ÷ 2)

Try calculating gross pay on your own

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Complete Activity One Now

I thought I could keep my Gross Pay! Now I know why it is called GROSS!

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What are two sure things in life?

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Death and Taxes

Income Taxes – money paid to the government on any income you receive.

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Payroll Taxes –money taken from employee paychecks and given to government for income tax. Based on employee earnings. Paying income taxes as you earn. (Tax Freedom Day)Ideal Situation,The money owed for income taxeswill equal the amount taken out pay for payroll taxes.

REQUIRED DEDUCTIONS

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

•Federal Taxes

•State Taxes

•FICA (Social Security and Medicare) NEXT

REQUIRED DEDUCTIONSFEDERAL TAXES

•The amount subtracted from gross pay for taxes is determined by the federal government and you through your allowances, W4.

•It is a percentage of gross pay based on a person’s total wages and living situation (married, single, children, etc.).

•The federal tax deduction is calculated referring to the appropriate tax table or by multiplying the government determined federal tax rate (from tax table) by gross pay.

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What is a W4? • Form that employers have you complete

when you start a job, directs them how much to withhold, take out, of your paycheck for taxes.

• ALLOWANCE – number that reduces the amount of money withheld from your pay. The more allowances you claim, the smaller the amount withheld.

• You may complete a new W4 anytime.

• LET’S COMPLETE A W4!NEXT

Calculating Federal Tax Deduction

Gross Pay x Federal Tax Rate = Federal Tax Deduction

•Johnny’s Gross Pay is $50.00

•Johnny’s Federal Tax Rate is 20%

•Johnny’s Federal Tax Deduction is $10.00

$50.00 x 20% = $10.00

$50.00 x .20 = $10.00

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Stressed-out Susie’s Gross Pay is:$35.00

Show me how to determine Susie’s Federal Tax

Deduction

I think I know,

check my answer

How many dollars are subtracted from her gross pay for federal taxes if the federal

tax rate is 20%?

Susie’s Federal Tax Deduction is

$7.00Taxes are collected to pay for

public services such as roads,

parks, etc.


Click here.


That’s a lot of cash going to Uncle Sam!

Susie’s Federal Tax Deduction is $7.00

Gross Pay x Federal Tax Rate = Federal Tax Deduction

$35.00 x 20% = $7.00

$35.00 x .20 = $7.00

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Diligent David’s Gross Pay is $48.00

I think I know,

check my answer

Show me how to determine David’s federal tax deduction

The Federal Tax Rate is 20%

What is David’s Federal Tax Deduction?

David’s Federal

Tax Deduction

is$9.60



Click here.

20% or .20 means

20¢ out of every dollar earned,

goes to Uncle Sam.

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

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

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REQUIRED DEDUCTIONSSTATE TAXES

•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.

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Calculating State Tax Deduction

Gross Pay x State Tax Rate = State Tax Deduction


•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

NEXT


I think I know,

check my answer

Show me how to determine David’s state tax deduction

The State Tax Rate is 18%

What is David’s State Tax Deduction?

David’s State Tax Deduction

is

$8.64



Click here.

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

18% or .18 means

18¢ out of every dollar earned,

goes to Uncle Sam.

} $8.64

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$48.00 x 18%

OR

$48.00 x .18

REQUIRED DEDUCTIONS

FICA•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.

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•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

Gross Pay x FICA Percentage = FICA Deduction


•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

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Stressed-out Susie’s Gross Pay is:$35.00

Show me how to determine Susie’s FICA DeductionI think I know,

check my answer

How many dollars are subtracted from her gross pay

for FICA?

Susie’s FICA Deduction is

$2.68Why should I pay for old people?

Someday you will be old

too!



Click here.

Susie’s FICA Deduction is $2.68

Gross Pay x FICA Percentage = FICA Deduction

$35.00 x 7.65% = $2.68

$35.00 x .0765 = $2.68

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I think I know,

check my answer

Show me how to determine David’s FICA deduction

What is David’s FICA Deduction?

David’s FICA Deduction is

$3.67After all these deductions, is

there any money left for me?


Click here.


$48.00 x 7.65% = $3.67

$48.00 x .0765 = $3.67

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After all these deductions, is

there any money left for me?

NET PAY, the money left after all

deductions are subtracted from

gross pay.NEXT

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


•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

Calculating Net Pay – the money after deductions, what you actually bring home…..

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•Her Gross Pay is $35.00

•Her Federal Tax Deduction is $7.00

•Her State Tax Deduction is $4.20

•Her FICA Deduction is $2.68

How much does Stressed-out Susie actually bring home?

I think I know,

check my answer

Show me how to determine Susie’s Net Pay

Susie will bring home

$21.12



Click here.

$35.00 - $7.00 - $4.20 - $2.68 = $21.12Gross Pay - Federal, State and FICA Deductions = Net Pay

Susie will bring home

$21.12

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What is Diligent David’s Net Pay?

I think I know,

check my answer

Show me how to determine 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

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.Oops, I guess I need help.

Click here.


•David’s Gross Pay is $48.00

• $8.00 x 6 hours = $48.00


•$48.00 x 20% = $9.60


•$48.00 x 18% = $8.64


•$48.00 x 7.65% = $3.67

David’s Net Pay

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David’s Net Pay =

$26.09

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

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

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ReviewComputer Whiz Carl works at Circuit City.

I think I know,

check my answer

Show me how to determine Carl’s Net Pay

• 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?

Carl’s Net Pay is $56.11



Click here.

•Carl’s Gross Pay is $90.00

• $7.5 x 12 hours = $90.00


•$90.00 x 20% = $18.00


•$90.00 x 10% = $9.00


•$90.00 x 7.65% = $6.89

Carl’s Net Pay

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

Carl’s Net Pay is $56.11 NEXT

OTHER DEDUCTIONS

• Health Insurance• Union Dues • 401(K) (often pre-tax)• Others?• PRE-TAX DEDUCTION – deduction is

subtracted from gross pay before required tax deductions are taken. (Lowers your income to be taxed, or taxable income)

FINAL REVIEWPlease show all your work on a piece of paper and hand in to

your teacher when done. Don’t forget your name!

• Angie the Accountant worked 32 hours for an hourly rate of $18.25

•The Federal Tax Rate is 18%

•The State Tax Rate is 15%

•She also has $4.00 per week taken out for 401(k) and $2.00/wk for health ins.

How much money does Angie actually take home? (her net

pay)

how much are you really making? "certain materials are included under the fair use exemption of...

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