Vocabulary
What is gross income?
Income before any taxes or deductions.
Name one mandatory deduction.
Federal tax, state tax, Social Security, Medicare.
What does a W-4 determine?
How much tax your employer withholds from your paychecks.
What does YTD stand for?
Year-to-Date.
Why is your gross income higher than your net income?
Taxes and deductions reduce your take-home pay.
What is net income?
Take-home pay after deductions.
Name one optional deduction.
Health insurance, retirement contributions, union dues.
What happens when you claim more allowances/dependents?
Less tax is taken out → bigger paycheck now.
Name one thing you can find on a pay stub besides how much you earned.
Deductions, hours worked, pay rate, YTD totals, benefits, taxes withheld.
How do Social Security taxes help society?
They provide retirement and disability income.
What does the term “withholding” mean?
Money your employer removes from your paycheck to pay taxes.
Why might an hourly worker earn different amounts on different paychecks?
Their pay depends on hours worked and overtime.
What happens when you claim 0 allowances?
More tax is taken out → smaller paycheck now.
What is the difference between deductions and earnings?
Earnings = money you made; deductions = money taken out.
How does Medicare help society?
It provides healthcare coverage for people 65+ and some disabled individuals.
What do FICA taxes pay for?
Social Security and Medicare.
What kind of pay applies when you work more than 40 hours in a week?
Overtime pay.
Why do employers take taxes out of your paycheck instead of making you pay them all at once?
To ensure taxes are paid gradually and prevent owing a large amount at the end of the year.
If your pay stub shows $300 federal tax withheld, what does that mean?
$300 has been sent to the federal government for your taxes.
How can benefits reduce your take-home pay?
Their costs are deducted from your paycheck.
What is taxable income?
The amount of income used to calculate the taxes you owe.
Explain one difference between salary and hourly pay.
Salary is a fixed amount; hourly pay depends on the number of hours worked.
Two people earn the same gross pay but take home different net pay. Give one possible reason.
Different benefits, different W-4 allowances, different state taxes, or different optional deductions.
How do benefits like health insurance appear on a pay stub?
As optional deductions that lower your net pay.
How do taxes affect both your personal finances and public services?
They reduce net pay but fund schools, roads, military, healthcare, and other public services.