7.13.2.g1 what do you feel is the best part of beginning a...

7.13.2.G1

© Family Economics & Financial Education – October 2010– The Essentials to Take Charge of Your Finances – Understanding Your Paycheck Essentials – Slide 1 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

What do you feel is the best part of beginning a new job?

There are many different answers to this question:

• Self satisfaction • Learning new skills • Change in routine

However, many people will believe it is the PAYCHECK received from that job!

7.13.2.G1

Understanding Your Paycheck Essentials-

Advanced Level

Family Economics & Financial Education

The Essentials to Take Charge of Your Finances

7.13.2.G1


What does an employee have to do before receiving a paycheck

from a new job?

1. • Fill out employment forms • Form W-4 and Form I-9

2.

• Choose how to receive the paycheck (if options are available)

7.13.2.G1


Form W-4 Employee’s Withholding Allowance Certificate

Determines the percentage of an employee’s pay that will be withheld for federal income taxes

What are taxes?

Taxes- Compulsory (required) charges imposed on citizens by local, state, and

federal governments

7.13.2.G1


Provide public goods and services

Taxes

What is an item or service that you use every day that is paid for by taxes?

• Citizens pay many different types of taxes in many different ways – Income tax, sales tax, property tax

• Largest amount of taxes paid is income taxes

7.13.2.G1


Income Taxes

Income Taxes Employers are required

to take income taxes directly out of an

employee’s paycheck

Federal and State Both Federal and State

Income Tax

Form W-4

Lets an employer know how much of an employee’s

paycheck to withhold to pay federal income taxes

Allowances Amount withheld is

determined by the number of allowances an employee

claims on Form W-4

7.13.2.G1


Allowances

• Used to determine the amount of federal taxes withheld from the paycheck

• A person may claim a personal allowance if no one else claims the person as a dependent – Dependent – a person who relies on the taxpayer

for financial support

Number of allowances claimed on

W-4

Amount of income

Amount of federal income tax withheld

from paycheck

7.13.2.G1


Form I-9 Employment Eligibility Verification Form

Verifies the legal eligibility of individuals to work in the United States. It is designed to avoid

hiring undocumented workers

Must provide documentation which establishes identity and

employment eligibility

Driver’s License Passport Social

Security card Birth

Certificate

7.13.2.G1


What are methods employers can use to pay employees?

Will discuss the following methods: 1. Paper Paycheck 2. Direct Deposit 3. Payroll Card

An employer may offer only one or all of these payment options to their employees.

7.13.2.G1


What is a Paper Paycheck?

Paper Paycheck – payment given with a paper check with a paycheck stub attached

Paycheck stub – lists important information about the paycheck and outlines the deductions made

• Least secure Employee is completely responsible for

paycheck Increased chance of the paycheck

getting lost • The cost for employers to print paychecks

is greater compared to direct deposit

• Common • Employee may choose

what action to do with the paycheck

• Deductions are clearly identified on the paycheck stub attached

7.13.2.G1


What is Direct Deposit?

Direct Deposit - employers directly deposit employee’s paycheck into the authorized employee’s depository

institution account

• Employees must use a depository institution for this method to be available

• Increased security and convenience for employee

• Employee knows exactly when paycheck will be deposited

• Employee can view their paycheck stub to see what deductions have been taken

– Employee receives a paycheck stub

7.13.2.G1


What is a Payroll Card?

Payroll Card - payment electronically loaded onto a plastic card

– Funds are automatically deducted from the balance of a payroll card when a purchase is made

– Can be used for ATM withdrawals or to make purchases

– Employee will receive some type of paycheck stub (may be electronic)

– There can be numerous fees associated with payroll cards

• Employees must be careful of fees charged by payroll cards

• Safer than carrying large amount of cash

• Can review paycheck stub

7.13.2.G1


Receiving a Paycheck

Will receive payment after the next pay period

Pay period - the length of time for which an employee’s wages are calculated

Weekly Bi-weekly Twice a month Monthly

Which payment method would work best for you?

7.13.2.G1


Reading a Paycheck Stub

On-The-Go

Employee Beakens, Joe

Employee Identification 201-92-4856

Check # 164

Check Amount $1,102.98

Employee Address 293 Michael Grove Billings, MT 59102

Pay Type- Gross Income

Payroll Withholdings Current Year-to-date

$1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K

$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

Why is it important to understand how to read a paycheck stub?

7.13.2.G1


Personal Information

– States the employee’s full name, address, and Employee Identification number (Social Security numbers are generally not shown)

– Always check to ensure this information is correct

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


Pay Period

– There will be a delay between the last day of the pay period and the actual pay date in order to give time to accurately process the payroll

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


Gross Income

– The total amount of money earned during a pay period before deductions

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


Net Income

– The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


Payroll Withholdings

– The amount of money subtracted or deducted from the gross pay earned – Mandatory deductions to pay taxes – Optional deductions to pay employee sponsored medical benefits,

and/or retirement benefits

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


Federal Withholding Tax

– The amount required by law for employers to withhold from earned wages to pay federal income taxes

– Largest deduction withheld from an employee’s gross income

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


State Withholding Tax

– The percentage deducted from an individual’s paycheck to assist in funding government agencies within the state (not all states have state income tax)

– The percentage deducted depends on the amount of gross pay earned

On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

7.13.2.G1


On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

FICA (Federal Insurance Contribution Act)

– This tax includes two separate taxes: Fed OASDI/EE or Social Security and Fed MED/EE or Medicare

– These two taxes can be combined as one line item or itemized separately on a paycheck stub

7.13.2.G1


On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

Social Security

– Nation’s retirement program, helps provide retirement income for elderly and pays disability benefits

– Based upon a percentage (6.2%) of gross income, employer matches the contribution made by the employee

7.13.2.G1


On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

Medicare

– Nation’s health care program for the elderly and disabled, provides hospital and medical insurance to those who qualify

– Based upon a percentage (1.45%) of gross income

7.13.2.G1


On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

Retirement Plan

– Optional deduction – The amount an employee contributes each pay period to a retirement plan – A specified percentage of the contribution is often matched by the employer

7.13.2.G1


On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

Medical

– Optional deduction – The amount taken from the employee’s paycheck for employer-

sponsored medical benefits

7.13.2.G1


On-The-Go



Check # 164






$106.00 $40.82 $83.91 $19.62 $0.00 $0.00

$503.46 $117.72 $636.00 $244.92 $0.00 $0.00

Totals $250.35 $1,502.10

Pay Period 6/11/2004-7/11/2004

Year-to-Date

– Total of all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub

7.13.2.G1


Summary

Fill out employment forms

Form W-4 • Determines

Federal Income Tax withheld

Form I-9 • Employment

eligibility

Determine method to receive paycheck

Examine advantages and disadvantages of each method offered to determine best method for you

Receive paycheck

After next pay period

Check the paycheck stub

Make sure you have been paid the correct amount

What is the process to obtain a paycheck?

7.13.2.g1 what do you feel is the best part of beginning a...

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