Transcript Taxable Income

Standards & Objectives
1) Define the concept of personal finance
and explain the importance of financial
planning.
Objectives:
• Define personal finance and financial
planning
• Examine the value of having a process of
planning how to use money.
*Set up your notes, and write an essential
question!
NOTES
Vocabulary
• Personal Finance: the way a person
handles their individual expenses and
income.
• Financial Planning - is a process of
setting goals, developing a plan to achieve
them, and putting the plan into action. It’s
creating a roadmap for handling
everything you do with your money—
spending, saving, using credit, and
investing.
“Most people don’t plan to fail…
They simply fail to plan!”
1) Discuss how a financial planning can be an important tool in helping achieve goals.
The Five-Step
Financial
Planning
Process
NOTES
Quick Write (QW):
Write down five need
and five wants, try to
rank them in order of
importance #1-5
Sample Wants and Needs
NEEDS
• Food for breakfast
• Clothes for school
• Transportation to
school or work
• ______________
• ______________
WANTS
• An iPOD
• DVD Players
• Cell Phone
• Hot Car
• ______________
• ______________
Values
NOTES
A belief or idea you consider important
or desirable:
– Getting a good education
– Religious faith or beliefs
– Social causes
– Handling money responsibly
– Friendships / The people I hang out with
1) What kind of things to you think affect a person’s values?
Summary & Closing
• Anyone want to share? What did you
learn? What did you like or dislike about
your reading?
• IN YOUR NOTES!
– Answer your essential question for the day!
Assignment!
• Log onto the computer
• Google “importance of personal financial
planning”
• Browse and choose an article to summarize and
reference.
• READ the article, then write a summary
paragraph about the (article/blog/news report)
• Copy and past the URL onto the bottom of your
summary.
• Save in your electronic portfolio as:
AA1 – Importance of Personal Finance
Standards & Objectives
2) Write long, mid, and short-term goals
while evaluating factors that may influence
the goals.
Objectives:
• Create personal financial SMART goals.
• Evaluate factors that affect goal setting
and income.
*Set up your notes, and write an essential
question!
Term Goals
• SHORT-TERM GOALS
–Less than one year
• INTERMEDIATE-TERM GOALS
–1-5 years
• LONG-TERM GOALS
–5 or more years
1-E
NOTES
Delayed Gratification
NOTES
When we wait for something we want so that
the situation is better, or more for our overall
benefit.
– Saving money over time to make a major
purchase.
– Waiting to buy a new product until the price
goes down.
– Waiting to see the latest movie until the
crowds get smaller and the lines shorter.
1-F
S-M-A-R-T GOAL CRITERIA
Specific
Measurable
Attainable
Realistic
Time-Limited
1-G
NOTES
SMART Goals
for lodging, transportation, meals
Specific…….. “Pay
for a 5-day trip to Washington, D.C.”
through fundraising, $50 from
Measurable… “$300
birthday money, save $25 a week.”
I stick to my plan, I’ll have the money
Attainable….. “Ifwhen
I need it.”
“I still have enough money to live
Realistic……. on while I work toward this goal.”
“I need to have all the money by 6
Time-Limited.. months from now.”
2) Use the details here to write this goal into one long SMART goal sentence!
Summary & Closing
IN YOUR NOTES!
– Answer your essential question for the day!
Partner Work!
• You will work with a partner to create a
“fairy tale life style”
• You will analyze the following
– How much money is needed per year?
– What type of education or training would be
needed to make this happen?
– How many people would be involved?
– What are the short, mid, and long term
milestones for the finances?
SMART Goal Worksheet
• Analyze each goal on the worksheet,
using letters (S.M.A.R.T) detail which
components are missing.
• Rewrite each goal with SMART format in
one long sentence.
Assignment!
• Write one short term personal financial
goal under today’s notes. Make sure it
contains all SMART components.
Standards & Objectives
• CTE P.F #1) Define the concept of personal finance and
explain the importance of financial planning.
• CTE P.F #2) Write long, mid, and short-term goals while
evaluating factors that may influence the goals.
• CTE P.F #6) Describe factors affecting take home pay such as
tax withholdings, benefits and payroll deductions.
Objectives:
• Calculate Income and describe the various types.
• Describe payroll deductions and their deduction rates.
• Analyze various types of taxes and the factors effecting income
withholdings.
*Set up your notes, and write an essential question!
Where’s my
MONEY?? And
why is my
paycheck so
small 
Income and Tax Terms
NOTES
• Salary – a fixed amount that you receive for a standard
amount of work, usually calculated per year.
• Base Pay – a fixed amount you receive either per year
or per hour regardless of sales or performance.
• Commission – a variable amount you receive based
on your performance or sales in addition to your base
pay.
• Hourly Pay – a fixed amount you are paid per hour,
only for the hours you work.
• Over Time – usually 150% (or time and a half) of your
hourly rate for working over the standard 40 hrs per
week.
• Minimum Wage – the minimum amount an employor is allowed
to pay their workers. This is determined by the state and does not
count if there is commission in addition to hourly wages.
• Bi-Weekly – getting paid every other week no matter the number
of weeks in a month.
• Semi-Monthly – getting paid twice a month (usually the 1st and
the 15th) despite the number of days or weeks in a month.
• Gross Pay – the total amount of pay including salary, overtime
pay, commissions, and bonuses.
• Net Pay – the total amount of money received by the employee
after all deductions from their pay check. These deductions may
include insurance, garnishments, and taxes.
• Taxable Income – the total amount used to calculate taxes owed
at the end of the year. Found by taking gross pay and subtracting
taxes paid, qualified deductions and credits.
Calculating Income
• When planning your financial future, or simply trying to
manage your money; it is important that you can
calculate your income.
• You need to be able to determine the amount of money
you need, or want to make.
• You also need to be able to determine the amount of
money you are owed in order to verify your pay amount.
• You need to be able to plan the amount of money you
need to save for your future goals.
• Tax deductions and limits are important to pay attention
to. Being knowledgeable about tax liability can reduce
your risk of tax problems.
NOTES
Example 1
• Calculate each type of Income.
a)
b)
c)
d)
A job paying $10.85/hr, guaranteed 40 hr/wk
A job paying $750 bi-weekly
A job paying $750 semi-monthly
A job paying $11.00/hr, guaranteed 30 hr/wk
a) $22568
b) $19500
c) $18000
d) $17160
Example 2
• Assume you work at Hollister and $7.65
an hour. You are guaranteed 40 hrs a
week, and if you work overtime you
receive time and a half pay. If you work
45 hours this week, what is your gross
pay?
a) $306.00
b) $344.25
c) $459.00
d) $363.38
NOTES
Example 3
NOTES
• You just got a new job at a used car lot.
You receive $100 dollars per week for
your base pay, and $100 dollars
commission for every car you sell. How
many cars do you have to sell in order
make $2,000 for the month of February.
(Assume Feb. has four weeks)
a) 16
b) 12
c) 10
d) 21
4(100) + x(100) = 2000
400 + 100x = 2000
100x = 1600
x= 16
Example 4
NOTES
• Sherry makes $36,000. She gets a
tax deduction of $5950 because she
is single. She receives no other
credits. What is her taxable income?
Your Money is THEIR Money!
• How do we get from gross pay to net
pay?
– By removing deductions from the gross pay.
• What is included in theses
“deductions”?
– Taxes, primarily, but also health care
contributions, retirement, or garnishments.
• What is the definition of Net Pay?
– The actual amount of money you receive
each pay check.
Summary and Closing
• Answer your essential question to close
out your notes for today.
Assignment
• Calculating Income Worksheet
• Goals Worksheet Due Friday 8/22
Standards & Objectives
• CTE P.F #6) Describe factors affecting take
home pay such as tax withholdings, benefits and
payroll deductions. Complete a W4 Tax form.
Objectives:
1. Describe factors affecting income.
2. Complete tax forms with accuracy.
3. Analyze federal taxes and their purposes.
Set up your notes, and write an essential
question!
IRS (Internal Revenue Service):
federal agency that collects taxes.
16th amendment (1913) allowed for
Federal Income Tax
• Federal Income Tax – is a graduated marginal
tax collected for the federal government.
Employers are required by law to with hold it,
and the amount depends on several variables.
– Your income
– Your marital status
– Your with holding allowance deductions (exemptions)
• Single Standard Deduction is $10,000
• Married Standard Deduction is $20,000
• Additional Dependent Deductions are $3900 each.
Tax Formulas
TAXABLE INCOME =
ANNUAL GROSS INCOME– (STATUS DEDUCTIONS)(PERSONAL DEDUCTIONS)-(DEPENDENDT
DEDUCTIONS)
**Deductions can be called exemptions.
**Credits come off your tax owed after tax is calculated.
Example 1:
Calculate the taxable income if Sally is married with two children
and her and her husband’s gross salary for 2013 was
$68,000.
Federal Insurance
Contributions Act (FICA) Tax
• Supports federal programs that provide benefits for
retirees, the disabled, and children of deceased workers.
Social Security benefits include old-age, survivors, and
disability insurance (OASDI); Medicare provides hospital
insurance benefits for the elderly.
• Social security – a tax that is collected for the federal
government to pay of retirement and disability benefits.
However, this fund may not be available in the future.
• Medicare – a tax that is collected for the federal
government to pay for hospitalization insurance.
• Revenue sharing: a share of tax funds provided
by the federal gov’t to state gov’t, or state gov’t to
local gov’t. Ex: Medicaid
Social Security and Medicare Taxes
Social Security taxes
2014
Employee
6.2% on earnings up to $113,700
Employer
6.2% on earnings up to $113,700
Self-employed
12.4%* on earnings up to $113,700
Medicare taxes
2014
Employee/employer (each)
1.45% on all earnings
Employee Only (Addt.
Medicare Tax)
0.9% additional on earnings over
$200,000
Self-employed
2.9%* on all earnings below $200K
Example 1
• Calculate FICA withholdings using the
information below.
– Federal Taxable Income: 60,000
– Employed by Staples, Inc
– Married, two children
Example 2
• Calculate FICA withholdings using the
information below.
– Federal Taxable Income : 175,000
– Employed by Snap On, Inc
– Single, no children
Example 3
• Calculate FICA withholdings using the
information below.
– Federal Taxable Income : 375,000
– Employed by Forbes Corporation
– Single, Three kids
Example 4
• Calculate FICA withholdings using the information
below.
– Federal Taxable Income : 53,000
– Owns a Landscaping Company
– Married, two kids
After you’ve been hired, complete a…
• W-4 form:
employee tells employer withholding allowances and SS #;
employer is able to determine amount of monthly taxes to be
withheld from person’s paycheck.
Filing your tax return each year
• After each year concludes, you
need to tell the government
whether you paid “too much”
or “too little” in taxes during
that year.
– W-2 form: employer
mails this to employee,
and is then used to fill out
1040EZ or 1040 tax
return.
• The W-2 form (next slide)
lists all of your earnings and
taxes from the previous
year.
W2 Form
• 1040EZ form: used to file tax return for
previous year; taxable income less than
$50,000; taxpayer has no itemized deductions.
• 1040 form: use to file tax return for previous
year; taxable income greater than $50,000;
taxpayer has itemized deductions.
Summary and Closing
• Answer your essential question(s) in your
notes!
Assignment
• Read the directions, and complete the W4
form as you were doing it for an employer.
DO NOT PUT YOUR REAL SOCIAL
SECURITY NUMBER: 123-45-6789
NEXT DAY
• Tax Simulations on irs.gov
Standards:
CTE – P.F #6) Describe factors affecting
take home pay such as tax withholdings,
benefits, and payroll deductions.
Objectives:
1. Analyze payroll deductions and their costs.
2. Discuss employee benefits options.
3. Evaluate retirement account options.
Vocabulary
• Payroll Deduction – any amount of money that is
deducted by your employer prior to you receiving your
paycheck, but after taxes.
• Payroll Reductions – any amount of money that is
deducted by your employer prior to you receiving your
check, before taxes! *affects gross pay
• Group Health Insurance – insurance that may be
provided by your employer at a lowered cost to you if
you agree to have the cost deducted from your check.
• Retirement Account – an account that can be set up
through your work, such as an 401K, and the amount
you select can be taken out of your check and deposited
into your retirement account.
Deductions & Reductions
http://www.ofm.wa.gov/policy/25.50.htm
• Mandatory Deductions – Federal taxes,
FICA Taxes
• Voluntary Deductions – loan repayment,
savings bonds, tuition, dues, employee
organizations, charitable contributions
• Mandatory Reductions – State retirement,
higher education retirement plans
• Voluntary Reductions – dependent care
accounts, flexible spending accounts,
health savings accounts
Google!
• Google: Common Employee Benefits
• Choose an article. Read!
• Write a summary of the article and save it
in your folder, copy the URL on the bottom
of your article.
• When you are done, proof read your tax
summary from yesterday again. Make final
changes. Put your name on it, and print it!
Summary and Closing
• Answer your essential question(s) in your
notes!
Assignment
• Using your notes create a review activity
for Unit 1. You must be able to share this
with other in class tomorrow.
– Examples: Crossword puzzle, flash card
game, matching game, worksheet, quiz.
End Unit 1
EXTRA SLIDES TO MOVE
TO OTHER UNITS AS
NEEDED!!!