Warm-Up Find the weekly wage: 1. A person that makes $32,000 annually
2. A person that makes $1,500 biweekly
3. A person that makes $1,300 semimonthly
CHAPTER 2 – NET INCOME Section 1
4. A person that makes $2,500 monthly
Section 1 – Federal Income Tax 1. What is Federal Income Tax? (FIT) Federal – U.S. Government Income – Money Earned Tax – Money taken for the government Used to pay for: Military, Education, Roads, National Parks, Government Employees, Government Programs, Courts 2. Who tells the employers how much money to withhold from an employee’s paycheck? IRS – Internal Revenue Service Uses marriage status and allowance to decide what amount should be taken from each paycheck.
3. What wage (annual, monthly, etc.) do we use when we look at the tables to determine how much should be withheld? - Weekly wage - Marital status (single or married) - Number of allowance claimed - You may claim 1 allowance for you - 1 for your spouse if married - 1 allowance for each person that you support
- p. 788 - 791
4. How much is withheld from the weekly wage of a married man earning $297 per week with one withholding allowance? 1. Go to the Married table on p. 790 2. Find the weekly wage interval: 290 – 300 3. Go over to the 1 allowance column Withholding: $11 per week 5. How much is withheld from the weekly wage of a married person earning $379 with 2 allowances? Married; 370-380 interval; 2 allowances $14 per week
Book problems: p. 117 #8, 9, 11, 13, 15 8. S; 350-360; 1 = $31 per week 9. S; 300-310; 2 = $15 per week 11. M; 290-300; 0 = $17 per week 13. S; 220-230; 1 = $12 per week 15. M; 250-260; 1 = $7 per week
6. How much is withheld from the weekly wage of a single person earning $238 with no allowances? Single; 230-240 interval; 0 allowances $22 per week
7. How much is withheld from the weekly wage of a single person earning $318 with 5 allowances? Single; 310-320 interval; 5 allowances $0 per week
Section 2 – State Income Tax 1. If we already pay money to the government through Federal Income Taxes, why do we have to pay money to the state through State Income Taxes? List some reasons why states need to charge taxes. (what are taxes used for?)
2. What are Personal Exemptions? Why do we need these in our paychecks?
4. What is a dependent? A person that depends on your income to survive. Children, Elderly Relatives, Spouse
- Withholding allowances - Money allowed to keep without paying taxes - Money to support self and family
3. What are the Personal Exemptions for the following: A single person - $1,500 per year A married person - $3,000 per year Each dependent - $700 per year
Patty’s gross pay is $65,800 per year. The state income tax rate is 3% of taxable wages. Patty takes a married exemption for herself and her husband. How much is withheld from her gross earnings for state income tax within the year? STEP 1: Find the taxable wages Take her annual pay and subtract her personal exemptions (use #3 as a guide)
STEP 2: Find the annual tax withheld Take her taxable wages (from STEP 1) and multiply by the Tax Rate
5. What is gross pay? Money made before taxes are taken out 6. What are taxable wages? Money after exemptions are taken out 7. How do we calculate taxable wages? Taxable Wages = (Gross Pay) – (Exemptions) 8. How do we calculate annual tax withheld? Annual Tax Withheld = (Taxable Wages) x (Tax Rate)(%)
Tony’s gross pay is $44,750 a year. The state income tax rate is 3.5% of taxable wages. Tony takes a single exemption for himself and one dependent exemption for his child. How much is withheld from his gross earnings for the year?
Exit Ticket 1. Jack is single and has 1 child. He claims 1 allowance on
his federal taxes. He makes $32,000 per year and is paid weekly. a. What is his weekly salary? 32000 / 52 = $615.38 b. What is his federal income tax per week? $70.00 c. What is his annual state income tax? 1. Exemptions = 1500 + 700 = $2200 2. Taxable Income = 32000 – 2200 = $29800 3. Income Tax = 29800 x 0.035 = $1,043
d. What is his weekly state income tax? 1043 / 52 = $20.06 e. How much does he take home per week after taxes? Federal Tax = $70 State Tax = $20.06 Weekly salary = 615.38 – 70 – 20.06 $525.32
2. Marry is married with 2 children. She claims 4 allowances on her federal income tax. She earns a semimonthly pay check of $1,689.00. The state income tax rate is 4.5%. a. What is her annual salary? 1689 x 24 = $40,536 b. What is her weekly salary? 40536 / 52 = $779.54 c. What is her federal income tax per week? $51 per week
d. What is her annual state income tax? 40536 – 3000 – 1400 = $36,136 36136 x 0.045 = $1,626.12 e. What is her weekly state income tax? 1626.12 / 52 = $31.27 f. How much does she take home per week after taxes? 779.54 – 51 – 31.27 = $697.27
