Intro
Needs Vs Wants
Needs: Something you must have (Basic Needs vs Consumer Needs)
Consumer Needs: Car
Basic Need: Food
Wants: Something you desire or would like to have (Jewelry)
Definition
Gross Pay: The amount of earnings before payroll deductions, earned income
Net Pay: AKA Take Home Pay, gross income minus payroll deductions, what ends up in bank acount
Definition of Benefits
In addition to salary, a person should consider benefits when accepting a job
Benefits - are forms of pay other than salary or wages
Benefits increase the overall value of a job
Full-time workers usually have benefits provided by the employer
Why do we pay taxes?
Taxes provide revenue for federal, local, and state governments to fund essential services--defense, highways, police, a justice system--that benefit all citizens, who could not provide such services very effectively for themselves.
W4
Determines the percentage of gross pay which will be withheld for taxes. Use this form to claim dependents.
Dependent – a person who relies on the taxpayer for financial support
Smart Goals
S - Specific
M - Measurable
A - Acheivments
R - Realistic
T - Time Bound
Different than regular goal writing because it is more time consuming
Examples of Types of Pay
Wages, Salary, Tips, Commision
401k
Retirement plan from your employer. Optional
Sometimes you will receive a “match” on your contributions.
Your contributions to the plan are tax free until you withdraw it in your 60’s and beyond.
You can’t take out until 59.5 years old.
You can borrow from your 401k at anytime, but you must pay it back with interest. You pay yourself with interest
IRS
Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress
This is also where we send our “tax returns” for the prior year by Tax Day (April 15th)
I9
Used to verify the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States
Must provide documentation which establishes identity and employment eligibility
Examples include driver’s license, passport, Social Security card, and birth certificate
Length of Goals
Short Term: 1 Year or Less (Watch)
Medium Term: 1 to 5 Years (Vacation)
Long Term: 5 or More Years (House)
Minimum Wage
The minimum wage is the lowest pay rate allowed by law for each hour worked.
Federal min wage is $7.25 per hour but many states are higher.
ROTH IRA
Roth IRA- funded with after tax dollars. Therefore when you withdraw it in the future, you do not have to pay taxes.
Types of Mandatory / Voluntary Deductions
Types of mandatory deductions
Federal income taxes
State income taxes
Social Security taxes
Medicare taxes
Local income taxes
Type of voluntary deductions
Insurance and employee benefits
Savings and retirement plan contributions
Donations
W2
Each year your will receive a Form W-2 from your employer in January
States the amount you were paid during the previous year
Gives the amount of income, Social Security, and Medicare taxes withheld from your pay that year
W-2 is required to prepare an income tax return
If you are not an employee but get paid by a company you will receive a form 1099 instead
Overtime Pay Rate
The overtime rate must be at least 1.5 times the amount of your hourly pay rate. Your employer must pay you at the overtime rate for the extra hours you worked over 40 hours a week for employees who get paid hourly only.
Pension
A pension is a retirement plan that provides income after you stop working. It's a fund that receives regular contributions during your working years. In retirement, you receive periodic payments from the fund.
Excise Tax
Excise tax: Ex. Gas, alcohol, cigarettes, airline tickets
1040
1040 – form that individual taxpayers use to file their annual income tax returns.
The form contains sections that require taxpayers to disclose their taxable income for the year to determine whether additional taxes are owed or whether the filer will receive a income tax refund
Use W2, as well as other information, to fill this out
Example Calculations
Greg earns $8 per hour. What is his overtime rate if he works more than 40 hours in a week?
8.00 x 1.5 = 12.00
$12 an hour overtime rate
If Greg works 43 hours in a week, what is his gross pay?
40 x 8 = 320
12 x 3 = 36
320 + 36 = $356
Tax Avoidance VS Evasion
Tax avoidance
reducing your taxes by claiming legitimate adjustments, tax deductions, and credits
Tax evasion
Failing to declare all income or falsifying deductions, adjustments, or credits
Tax evasion can result in:
IRS audit
heavy penalties