Income
If you are working while you are in school, you are probably being paid an hourly...
Wage / Rate which can be defined as a dollar amount per hour that you get paid for doing work
What are voluntary deductions?
You may request to have additional deductions withheld from your paycheck
Examples:
Insurance (Health, Life, Disability)
Retirement Savings Accounts
Savings Plans
Charitable Contributions
Calculations for these deductions vary.
Some insurance plans may be covered partially by your employer
Retirement accounts can be a percentage of your total pay or a flat dollar amount each pay period
What is the first and last day of the calendar year?
January 1st and December 31st
I am received in January. There is one of me for every job you work. You can tell how much you earned and how much you paid in taxes by reading me.
I am a W-2
This form will be sent to Lily by the end of January. She will use this W-2 form to...
File her income taxes
What is regular pay / earnings? How do you calculate it?
You can work up to 40 regular hours per week
Hourly rate x hours works (up to 40/week) = regular earnings
What is an example of a mandatory deduction?
Federal Income Tax - taxes on income that are collected by the U.S. Government
Social Security Tax - a social insurance program run by the U.S. Government. It provides benefits for retired workers, the disabled, and other qualified persons.
Medicare Tax - A national health insurance program run by the U.S. Government
State Income Tax - taxes on income that are collected by a state government
Local Income Tax - taxes on income that are collected by a local government
When do you complete a W-4, indicating how much in taxes you'd like withheld from each paycheck?
Whenever you start a new job
I am received in January. You get me if you are not an employee, but were paid by a company. You can also get me for other types of income, such as gains and losses in brokerage accounts, dividend and interest payments and more. Your probably didn't get taxes withheld if you got me, so you may have a big tax bill coming up.
I am a 1099
Based on this W-2, which of the following statements is TRUE?
Lily earned more than $12,950 (which is the standard deduction amount)
What is overtime pay/earnings? How do you calculate it?
Overtime is paid for any hours worked over 40 per week
Overtime Rate - Regular Pay Rate x 1.5 (most businesses pay "time and a half" or 1.5 times the hourly rate for overtime)
Overtime Pay - Overtime Rate x Overtime Hours Worked
What is federal income tax?
The IRS (Internal Revenue Service) provides tax tables for employers. These tables show the amount to be deducted from each employee’s pay
This amount is determined by your total earnings, marital status, and the number withholding allowances you claim
Withholding allowance: people for whom you are finally responsible, such as children.
The fewer allowances you claim, the more taxes will be deducted from your pay
Some people claim zero. This allows them to get a larger tax refund when they file their income tax return.
What is the first day you can submit tax returns for the previous year?
January 23, 2023 (although you likely will not have received necessary documents to file)
I am completed every April. Anyone can use me. Beware, there is a lot to fill out
I am a 1040
As Lily files her taxes, she learns that her federal total tax due ends up being $190. According to her federal income tax withheld, how much of a tax refund can she expect back?
$890.50
What is Gross Pay/Earnings? What is Net Pay?
Gross Pay/Total Earnings: the total amount of earnings before any deductions
Regular Earnings + Overtime Earnings = Gross Pay/Total Earnings
Net pay is also referred to as Take Home Pay.
This is the amount that you get to take home once all of your deductions have been subtracted from your total earnings/gross pay.
Total Earnings - Total Deductions = Net Pay
What is the difference between state and local income taxes?
Most, but not all, states collect state income taxes. States that do not: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
These taxes are used to pay for state services such as state government, roads, education, and other services
Pennsylvania uses a Flat Tax - 3.07%
Local taxes are used for police departments, schools, county or city roads, and other local services.
These taxes are also percentages of your pay.
Typical local taxes range from 0.5% to 2% of your total earnings
What is the deadline for employers to mail W-2s to their employees (either by paper or electronically)?
January 31st (if you worked multiple jobs in a year, you will received multiple W-2s)(mass majority of people wait until after this date to file taxes since without a W-2, it is difficult to accurately determine your taxes owed)
I am received whenever you start a job. You list information about yourself and your family on me. i determine how much money gets taken out of each paycheck.
I am a W-4
Based on the W-2 provided, Social Security tax withheld for Lily was _____ of wages and Medicare tax withheld was _____ of wages
6.2%, 1.45%
What is a salary? How do you calculate it?
A salary is a set amount of money paid to someone in exchange for work. A salary is defined as a year amount (paid weekly, biweekly, semimonthly, or monthly). Some employees who are paid a salary are not paid for any overtime hours.
To calculate annual salary, multiply the amount by the number of payments per year.
Annual - 1 pay, Monthly - 12 pays, Semimonthly - 24 pays, Biweekly - 26 pays, Weekly - 52 pays
What two taxes were created under the Federal Insurance Contribution Act (FICA)?
Social Security Tax:
6.2% of your total earnings each pay period (Total Earnings x .062)
You can begin to collect some benefits when you are 62. However, you will only receive 75% of your monthly benefit.
Eligibility to receive full benefits varies about the date of your birth and continues to change.
Medicare Tax:
1.45% of your total earnings each pay period (Total earnings x .0145)
Used to give medical benefits to those who collect Social Security and meet specific age requirements as well as other requirements
What is the last day to submit income tax forms or to request an extension? What is the deadline for filing income tax returns that have received extensions?
April 15 and October 15
I am received whenever you start a job. You use me to prove that you are eligible to work in the U.S. You must provide forms of identification when submitting me.
I am a I-9
Based on the W-2 provided, Lily paid Indiana a state income tax rate of ____
3.2%