Unit 2: Paychecks and Taxes

commission

get paid for what you do exactly

what is gross pay

the amount of money you earn before deductions

What is the definition of minimum wage

lowest wage permitted by law or by a special agreement

how is gross pay calculated

# of hours worked x hourly pay = gross pay

What is net pay

the amount of money you make after deductions

how is net pay calculated

gross pay - total deductions = net pay

what are deductions

money taken out of your paycheck by your employer

what are 3 deductions that are required for Illinois workers

• federal income tax (to US gov.) 

• State income tax (some states don’t have Illinois does)

• FICA 

what is another way to say FICA (Federal Insurance Contributions Act)?

social security tax + Medicare taxes (health insurance for old people)

what are some voluntary deductions that workers may choose to have taken out?

• insurance (medical, dental, vision)

• retirement plans (401K or pension) 

• Contributions to charity 

• Union dues 

why do we pay taxes?

to pay services and maintain government

about what percent does the average person pay in taxes

20-25% income goes toward taxes

what are the 3 levels of government to which we pay taxes?

• federal (US gov.)

• State (Illinois)

• Local (dupage county/lombard)

what are some services we get from the Federal level for our tax dollars?

defense and security, low-income assistance programs, interest on national debt, social security and Medicare/medicaid, education, scientific and medical research

What are some services we get from the state level for our tax dollars

education, healthcare, transportation (roads and public transportation), corrections facilities, low-income assistance

what are some services we get from the local level for our tax dollars

education, police, and fire protection, libraries, parks, and sanitation

What is sales tax

charged on the merchandise that you buy

what level(s) of government does sales tax go to?

goes to state and local

what is an excise tax? What are some examples of items that would have an excise tax?

an additional sales tax on specific items. Ex: gas, cigarettes, and liquor

what is property tax?

tax on land and building (house)

what level (s) of government does property tax go to?

major source of income for local government (helps fund education)

what is an estate tax? Who would typically pay it?

a tax on the value of a person’s assets at the time of his or her death. Person who takes in the money?

what level(s) of government impose an estate tax?

federal: taxed on value over 11.2 million per person

state (Illinois): taxes on value over 4 million

what is gift tax? What amount must be given in order to be charged a gift tax?

a federal tax on money given to someone else in excess of (either 15,000 or 19,000????)

What level(s) of government does a gift tax go to?

primarily federal, but one state, Connecticut does impose its own gift tax

what is income tax

a tax on the amount of money you make

what level (s) of government does income tax go to?

federal income tax: is progressive: the more you make, the higher % you will pay

state (Illinois) income tax: is flat: you pay the same % no matter how much you make (4.95%)

what is progressive tax?what tax is classified as a progressive tax?

tax system where tax rate increases as the taxable income increases. Federal individual income tax. 

What is regressive tax? what tax is classified as a regressive tax?

Tax that takes a larger percentage of income from low-income groups than from high-income groups. Sales tax and excise tax. Or Illinois income tax???

what is the purpose of FICA (Social Security)?

to finance retirement, disability, etc.

what is the purpose of a W4?

Tells your employer how much tax to take out of each paycheck

When do you fill out a W4

you complete one for every job you have

what is an allowance

an adjustment to tax based on marital and dependent status (more allowances you claim, the less tax is taken out)

what is the purpose of W2?

to show how much money you earned and how much you paid in taxes for calendar year

When should you expect to receive your W2 from your employer?

by January 31, use to complete taxes 

what is the purpose of 1099INT?

to show how much interest you have earned on any accounts at your bank

When should you expect to receive your 1099INT from your bank?

by January 31st 

what is the purpose of the 1040 form?

tax refund or payment. Used to report income earned and taxes paid when filing your taxes (you are responsible for getting this done)

when is the 1040 form due in order to file your taxes on time?

April 15th

what is a dependent

people that are supported financially either children or elderly relatives that can reduce your taxes.