Chapter 8 Chapter 8 Income and TaxesIncome and Taxes

Objectives:Objectives:

Types of incomeTypes of income Regulations affecting Regulations affecting

paypay Examples of benefitsExamples of benefits Employment Employment

classifications and classifications and effect on pay effect on pay

Wage gap after collegeWage gap after college

http://lifeinc.today.com/_news/http://lifeinc.today.com/_news/2012/10/23/14649785-wage-gap-starts-2012/10/23/14649785-wage-gap-starts-right-after-college-research-shows?lite right-after-college-research-shows?lite

What was average salary for college What was average salary for college graduates one year out of school for graduates one year out of school for women vs. men in 2009? women vs. men in 2009?

8.1 Types of Pay8.1 Types of Pay

Salary: ex: $45,000 a yearSalary: ex: $45,000 a year Wages: ex: $10/hourWages: ex: $10/hour Piecework: ex: $12.00 per basketPiecework: ex: $12.00 per basket Commission ex: 10% of salesCommission ex: 10% of sales

some earn 100% commission, sometime some earn 100% commission, sometime base pay + ___% commission.base pay + ___% commission.

8.1 Types of Pay8.1 Types of Pay Salary: ex: $45,000 a yearSalary: ex: $45,000 a year

Ex:Management positions, skilled workersEx:Management positions, skilled workers

Wages: ex: $10/hourWages: ex: $10/hour ex:hourly workers, may be lower skilledex:hourly workers, may be lower skilled Piecework: ex: $12.00 per basketPiecework: ex: $12.00 per basket

Ex: artists Ex: artists

Commission ex: 10% of salesCommission ex: 10% of salessome earn 100% commission, sometime some earn 100% commission, sometime

base pay + ___% commission.base pay + ___% commission.

8.1 Define Types of Pay8.1 Define Types of Pay

Pros: Cons: Pros: Cons: SalarySalary: : consistent pay long hours no consistent pay long hours no

overtime pay overtime pay

WagesWages: : over time pay fewer hours less pay over time pay fewer hours less pay

PieceworkPiecework: : incentive to produce incentive to produce low performance, low performance, low/no pay low/no pay

CommissionCommission::performance incentiveperformance incentive low performance, low performance, low/no pay low/no pay

Which is better?Which is better?

$15.00 per hour or $15.00 per hour or $30,000/ year?$30,000/ year?

Calculate.Calculate.

Answer:Answer:

$15.00 x 40 hrs per $15.00 x 40 hrs per week= $600/weekweek= $600/week

$600/week x 52 $600/week x 52 weeks = weeks = $31,200$31,200

$15.00/hour = $15.00/hour = $31,200 vs. $30,000$31,200 vs. $30,000

Tips and BonusesTips and Bonuses

Do you pay taxes on Do you pay taxes on tips and bonuses?tips and bonuses?

Tips and BonusesTips and Bonuses

Do you pay taxes on tips Do you pay taxes on tips and bonuses?and bonuses?

Yes. Yes. IL: Tipped employees IL: Tipped employees

earn earn $4.95 per hour$4.95 per hour (employers may claim (employers may claim credit for tips, up to 40% credit for tips, up to 40% of wage[21]). of wage[21]). http://www.dol.gov/whd/sthttp://www.dol.gov/whd/state/tipped.htm#Illinois ate/tipped.htm#Illinois

Fair Labor Standards ActFair Labor Standards Act

Same work, same pay.Same work, same pay. Prevent discriminationPrevent discrimination

Fair hourly wagesFair hourly wages Minimum wage Minimum wage IL $8.25IL $8.25 Sub-minimum wage: under 20, dev. Sub-minimum wage: under 20, dev.

Disabled, or full time students.Disabled, or full time students. IL Employers may pay anyone under the IL Employers may pay anyone under the

age of 18 fifty cents less.age of 18 fifty cents less.

OvertimeOvertime

Over 40 hours/weekOver 40 hours/week 1.5 x hourly rate1.5 x hourly rate

Salary employees Salary employees excluded.excluded.

Calculate gross pay for Calculate gross pay for 43 hour week43 hour week $9.50/hr$9.50/hr

Other benefits that may Other benefits that may be offered through be offered through employer:employer:““Fringe BenefitsFringe Benefits””

Health, dental, vision Health, dental, vision insurance plansinsurance plans

Savings/retirement plansSavings/retirement plans Paid holidaysPaid holidays Sick leave, bereavement Sick leave, bereavement Pay for additional Pay for additional

educationeducation DiscountsDiscounts Ex: Wesclin teachersEx: Wesclin teachers

13 sick days/year 13 sick days/year 3 personal days3 personal days

Employment Employment classificationsclassifications

Full-timeFull-time: 35+ hours/week: 35+ hours/week Qualify for other company benefits.Qualify for other company benefits.

Part-time:Part-time: under 35 hrs/wk. Most do not qualify for under 35 hrs/wk. Most do not qualify for benefits.benefits.

Temps:Temps: Short term assignments. No benefits. Short term assignments. No benefits. Hired through temp agency, cheaper for employers.Hired through temp agency, cheaper for employers.

Contract: Contract: Hired for specific period to complete project. Hired for specific period to complete project. No company benefits.No company benefits.

8.2 Understanding 8.2 Understanding paycheckspaychecks

How would you like to How would you like to get paid?get paid? WeeklyWeekly Bi-weekly (2 weeks)Bi-weekly (2 weeks) MonthlyMonthly

Direct Deposit-Direct Deposit- check check goes directly into your goes directly into your specified bank account. specified bank account.

*receive money faster. No *receive money faster. No trip to bank.trip to bank.

WhatWhat’’s on a paystub?s on a paystub?

Employee identification Employee identification (Social Security #)(Social Security #)

Pay periodPay period Earnings: hours x rate of Earnings: hours x rate of

paypay YTD= year to dateYTD= year to date T/P= this pay periodT/P= this pay period

Where does all my money Where does all my money go??go??

Gross PayGross Pay: total amount of : total amount of money earned.money earned.

Net PayNet Pay: (: (““take home paytake home pay””) ) Amount of pay AFTER Amount of pay AFTER taxes and other deductions taxes and other deductions are taken out.are taken out.

Look at your paystubs… Look at your paystubs… How did your Net Pay compare How did your Net Pay compare

to your Gross Pay?to your Gross Pay? Record answers on paystub: Record answers on paystub:

1) What percentage of your paycheck did you 1) What percentage of your paycheck did you actually get to keep? Divide net by gross actually get to keep? Divide net by gross amount = ____%amount = ____%

Did anyone pick a state with no state tax?Did anyone pick a state with no state tax?

2) Estimate about how long are you working in 2) Estimate about how long are you working in order to just pay your tax deductions??order to just pay your tax deductions??

What else may be What else may be deducted from your deducted from your paycheck?paycheck?

Health InsuranceHealth Insurance Life insuranceLife insurance Dental insuranceDental insurance Vision insuranceVision insurance Retirement plans i.e. 401K, pensionsRetirement plans i.e. 401K, pensions Medical savings accountsMedical savings accounts

Who is Who is ““FICAFICA””?! ?!

Social SecuritySocial Security (FICA): Pays retirement, (FICA): Pays retirement, survivors, disability benefits.survivors, disability benefits.

MedicareMedicare (FICA): Helps pay medical (FICA): Helps pay medical expenses for those that qualify- expenses for those that qualify-

““Federal Insurance Contributions ActFederal Insurance Contributions Act””

Other Taxes:Other Taxes:

Federal & State Federal & State Taxes: Help pay for Taxes: Help pay for schools, roads, schools, roads, Parks, Law Parks, Law enforcement, etc.enforcement, etc.

Should you pay higher Should you pay higher tax rates if you make tax rates if you make more $?more $?

http://www.bargaineering.com/articles/http://www.bargaineering.com/articles/federal-income-irs-tax-brackets.html federal-income-irs-tax-brackets.html

What tax bracket would you be in as a What tax bracket would you be in as a single person?single person?

Is being Is being ““Paid under the TablePaid under the Table””

a good idea?a good idea?

Concerns of Concerns of ““Paid under the Paid under the tabletable””

not offering you any of the not offering you any of the benefitsbenefits to which to which you might be entitled, you might be entitled,

youyou’’re probably re probably not coverednot covered for purposes of for purposes of workerworker’’s compensations compensation or or unemploymentunemployment. .

YouYou’’re definitely re definitely not paying in to Social not paying in to Social Security. Security.

No Proof of income-No Proof of income- Can Can’’t gets loans, credit.t gets loans, credit.

What President started What President started income taxes? Why?income taxes? Why?

What President started What President started income taxes? Why?income taxes? Why?

To help fund theTo help fund the

Civil War, 1863.Civil War, 1863.

18951895 Ruled Income TaxRuled Income TaxUnconstitutionalUnconstitutional

1913 Woodrow Wilson1913 Woodrow Wilson’’s term,s term,

1616thth Amendment allowed Gov Amendment allowed Gov’’t to t to collect income taxes.collect income taxes.

19301930’’s FDR increased taxes to help s FDR increased taxes to help pay for SOCIAL SECURITY.pay for SOCIAL SECURITY.

referencesreferences

http://en.wikipedia.org/wiki/http://en.wikipedia.org/wiki/List_of_U.S._minimum_wagesList_of_U.S._minimum_wages