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Objective 4.01
 Students will be able to understand types of work
compensation and forms used for work and income
                   tax purposes.
http://www.themint.org/kids/decoding-your-paycheck.html
   What are the ways in which an employee can
    be paid?
   What should employees know about
    employment and income tax forms?
   Types of monetary compensation---wages, salary,
    commissions, tips, bonuses
       Wages---an amount of money paid for a specified quantity of labor
         Minimum wage---the lowest wage employers may legally pay workers
          (set by the Fair Labor Standards Act)
         Types of wages---full-time, part-time, flexible/seasonal, and overtime
       Salary---a set amount of income paid for a set period of time
        worked
       Commission---income paid as a percentage of sales made by a
        salesperson
       Tips---also known as gratuities-monies paid by customers to those
        who provide services
       Performance Bonus---money in addition to base pay, either as
        reward for performance or as share of profit
       Production – money earned for a volume of product created, more
        product made = more gross earnings
   Federal law that first established
     Minimum wage
     Maximum hours, Overtime requirements
     Child labor laws
         # of hours, time limits
         Type of work
   Research:
     When was FLSA enacted?
     What is current minimum wage?
     What are limitations on legal jobs for a 16 year old?
         Type of jobs
         Hours 16 year olds can work
Per.fin.4.01 p pta compensation
   Types of non monetary compensation
   Non-monetary
    compensation-employee            Paid vacation, holidays and sick leave
    does not get $ in paycheck,      Insurance- group health, dental, life, vision
    but employer pays for all
    or part of these benefits--          Cost may be fully or partially paid by employer
    also known as fringe
                                      Savings/retirement plans if employer pays portion
    benefits, or perks            


                                     Education-related benefits---tuition, credits, job
   Benefits are not required         training
    by law, but are offered at
    the option of employers          Family -related benefits---child care, maternity
     Individual employees            leave, adoption leave/support, family leave
       may negotiate with
       their employer for a          Unemployment Tax- required by law to be paid at
       ―benefits package‖,            state & federal levels by employer
       especially in
       management situations         Social Security - FICA requires employers to match
     Employees who are               every dollar contributed by employee to Social
       union members                  Security
       negotiate for their
       benefits
   When making an
    employment
    offer/acceptance,
    benefits are a
    critical element.
    Employers offer the
    best compensation
    package available
    to recruit and keep
    high quality
    employees.
 Paycheck

 Directdeposit
 Payroll card
   Paycheck –
    Traditional paper            Monetary deductions
    document                      subtracted for
     Issued to an                   Mandatory systematic
      employee for services            Federal/state income taxes
      rendered                         Employer sponsored
                                        retirement
     Most common
                                       Court ordered garnishment
      method of payment                 of wages
      for work
                                     Voluntary deductions
     Employer physically
                                       Insurance
      provides the
                                       Investments
      employee with
                                       Loan repayments
      his/her paycheck
                                       Pension contributions
     Employee takes
                                      and other benefits
      check to financial
      institution
   Paycheck stub
       Attached to the paycheck to show the deductions
       Retained (kept)by employee for financial records


   Contents of paycheck stub
       gross pay, net pay, hourly wage, hours worked,
        state/federal withholdings, Social Security tax,
        employee’s name, Social Security number, total
        earned and withheld, year to date, last day of pay
        period
Per.fin.4.01 p pta compensation
   When employers directly deposit an
    employee’s paycheck into an authorized
    account
     On payday, Employee receives a paycheck electronic
      notice showing deductions
     Direct deposit evidence cannot be cashed at bank

   More secure because there is no direct handling
    of the check & the employee knows exactly
    which day paycheck will be deposited and
    available for use
DEFINITION:

prepaid card offers
  employees an              BENEFITS TO EMPLOYEES
  alternative to paper
                                Reduces or eliminates check
  paychecks or directly     
                                cashing fees
  depositing wages into        Offers ability to make
  an employee’s financial       purchases using credit card
                                networks
  institution account          Offers 24-hour access to
                                funds via ATMs; no need to
                                wait in lines
                               Reduces the need to carry a
                                lot of cash
                               Makes money transfers more
                                easily available to families
                               Provides a pseudo-bank
                                account—funds do not need
                                to be withdrawn entirely as
                                when using a check casher
   Benefits to employers
     Reduces bank processing and check handling fees
     Reduces check printing costs
     Reduces likelihood of check fraud
     Reduces check reconciliation costs
     Increases employee productivity (no time off to cash
      or deposit paycheck)
     Reduces lost/stolen check replacement costs
   Income taxes are:
       Taxes paid on earnings
       Mandatory deductions from earnings
       Estimates of taxes owed
       Known as progressive taxes; the higher the income
        earned, the higher the % rate of taxes
         In contrast, sales taxes are regressive taxes; they impose
         same rate to all sales of goods; therefore; higher taxes
         (in comparison to earnings) are paid by those with
         lower incomes than those with higher.
   Used before beginning a job
       W-4 – the Employee’s Withholding Allowance
        Certificate; information provided here determines
        the percentage of gross pay to be withheld for taxes
       I-9 – the Employment Eligibility Verification form;
        information gathered in this form is for employers to
        verify eligibility of individuals for employment;
        helps avoid hiring undocumented workers or others
        who are not eligible to work in the United States
       Social Security card or other identification
irs link: W-4 simulation
       Complete simulation 1



       Completed by
        employee for
        employer
        payroll records
       Provides
        information for
        tax deductions
            Marital status
            Exemption
             status
SIMILAR FORM - NC-4 FOR TAX
WITHHOLDING FOR NORTH
CAROLINA RESIDENTS
irs link: calculate payroll taxes
   http://www.irs.gov/app/understandingTaxes/student/simulations.jsp



   Complete Module 1: W-4
   Identity document
   Required use for
    Federal Income Taxes
   I-9 proves your right to
    work in US if you are not
    a citizen.

   Employment
    Identification and
    Verification Form
Employers must complete and
    retain a Form I-9 for each
    individual they hire for
    employment for 3 years
    from date hired
The form must be available for
    inspection by authorized
    U.S. Government officials
    (e.g., Department of
    Homeland Security,
    Department of Labor,
    Department of Justice).
On the form, the employer
    must examine the
    employment eligibility
    and identity document(s)
    an employee presents to
    determine whether the
    document(s) reasonably
    appear to be genuine
   Used after end of year when filing income taxes
     W-2 - states amount of money earned and taxes paid
      through previous year
     Issued by employer to employee by January 31 of
      following year
     Form 1040/1040A/1040EZ - common forms for filing
      federal income tax return
     1099 Forms - Tax forms that report other sources of
      income earned during a tax year. 1099-INT for interest
      income, 1099-DIV for dividends on investments, and
      1099-MISC for other sources of income such as contract
      labor
Per.fin.4.01 p pta compensation
   Reports actual income and
    deductions for the tax
    year
   Taxpayer must file by
    April 15th of the following
    year
   Actual due compared to
    estimated payments
   Results in either refund or
    additional payment to IRS
SAMPLE 1099 FORM

   Reports income not
    related to employment
   Examples:
       1099-DIV
         Dividends
       1099- INT
         Interest income
       1099-MISC
         Contract labor
         Distribution of pensions
         Miscellaneous income
   http://www.irs.gov/app/understandingTaxes/student/simulations.jsp



Complete Module 2 & 3:
W-2, Form 1099-Int, 1040EZ

   Complete Module 7: Standard Deduction
   Employees must retain appropriate records:
       Records of deductible expenses, including receipts
        and bank statements
       Social Security number serves two major purposes:
        (1) provides a record of your covered earnings for
        retirement and disability benefits and (2) serves as
        an identification number for the Internal Revenue
        Service
    Unwrap and slice the Payday candy bar. Read the
    ingredients list on the label. Note: Just as each candy slice
    contains some of each ingredient, so each paycheck contains
    specific kinds of information.
      Have students scan FEFE 1.13.1.F1 information sheet
    “Understanding Your Paycheck” and complete the graphic
    organizers Appendix 4.01A, “Forms of Compensation,”
    Appendix 4.01B, “Money In, Money Out,” and Appendix
    4.01C, “Employment, Wage and Tax Forms”
      Have students complete the note-taking guide, FEFE
    1.13.1. L1, “Understanding Your Paycheck and Tax Forms”
    as they view FEFE PowerPoint “Understanding your
    Paycheck.” Answer questions; discuss.
   (In advance, download a blank Form W-4 and Form I-9 from
    www.irs.gov). Stop at slides 12 and 13 and guide students
    as they complete Form W-4 and Form I-9.
   " W-4, work some more"
   ―W-2 your taxes are due".
   1040EZ as in "easy" and
   I-9-like the interstate- you travel from place to
    place and sometimes you travel across the
    border and you need to prove your citizenship,
    i.e. Canada, Mexico.
   Map your financial                   Don’t borrow what
     future                                you can’t repay
    Money doubles by the                 Don’t expect
     ―Rule of 72‖                          something for nothing
    Your credit past is                  High returns equal
     your credit future                    high risks
    Start saving young                   Know your take-
    Stay insured                          home pay
    Budget your money                    Compare interest
                                           rates
                                          Pay yourself first
http://www.jumpstartcoalition.org/files2010/2010_J$_Calendar.pdf

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Per.fin.4.01 p pta compensation

  • 1. Objective 4.01 Students will be able to understand types of work compensation and forms used for work and income tax purposes. http://www.themint.org/kids/decoding-your-paycheck.html
  • 2. What are the ways in which an employee can be paid?  What should employees know about employment and income tax forms?
  • 3. Types of monetary compensation---wages, salary, commissions, tips, bonuses  Wages---an amount of money paid for a specified quantity of labor  Minimum wage---the lowest wage employers may legally pay workers (set by the Fair Labor Standards Act)  Types of wages---full-time, part-time, flexible/seasonal, and overtime  Salary---a set amount of income paid for a set period of time worked  Commission---income paid as a percentage of sales made by a salesperson  Tips---also known as gratuities-monies paid by customers to those who provide services  Performance Bonus---money in addition to base pay, either as reward for performance or as share of profit  Production – money earned for a volume of product created, more product made = more gross earnings
  • 4. Federal law that first established  Minimum wage  Maximum hours, Overtime requirements  Child labor laws  # of hours, time limits  Type of work  Research:  When was FLSA enacted?  What is current minimum wage?  What are limitations on legal jobs for a 16 year old?  Type of jobs  Hours 16 year olds can work
  • 6. Types of non monetary compensation  Non-monetary compensation-employee  Paid vacation, holidays and sick leave does not get $ in paycheck,  Insurance- group health, dental, life, vision but employer pays for all or part of these benefits--  Cost may be fully or partially paid by employer also known as fringe Savings/retirement plans if employer pays portion benefits, or perks   Education-related benefits---tuition, credits, job  Benefits are not required training by law, but are offered at the option of employers  Family -related benefits---child care, maternity  Individual employees leave, adoption leave/support, family leave may negotiate with their employer for a  Unemployment Tax- required by law to be paid at ―benefits package‖, state & federal levels by employer especially in management situations  Social Security - FICA requires employers to match  Employees who are every dollar contributed by employee to Social union members Security negotiate for their benefits
  • 7. When making an employment offer/acceptance, benefits are a critical element. Employers offer the best compensation package available to recruit and keep high quality employees.
  • 9. Paycheck – Traditional paper  Monetary deductions document subtracted for  Issued to an  Mandatory systematic employee for services  Federal/state income taxes rendered  Employer sponsored retirement  Most common  Court ordered garnishment method of payment of wages for work  Voluntary deductions  Employer physically  Insurance provides the  Investments employee with  Loan repayments his/her paycheck  Pension contributions  Employee takes and other benefits check to financial institution
  • 10. Paycheck stub  Attached to the paycheck to show the deductions  Retained (kept)by employee for financial records  Contents of paycheck stub  gross pay, net pay, hourly wage, hours worked, state/federal withholdings, Social Security tax, employee’s name, Social Security number, total earned and withheld, year to date, last day of pay period
  • 12. When employers directly deposit an employee’s paycheck into an authorized account  On payday, Employee receives a paycheck electronic notice showing deductions  Direct deposit evidence cannot be cashed at bank  More secure because there is no direct handling of the check & the employee knows exactly which day paycheck will be deposited and available for use
  • 13. DEFINITION: prepaid card offers employees an BENEFITS TO EMPLOYEES alternative to paper Reduces or eliminates check paychecks or directly  cashing fees depositing wages into  Offers ability to make an employee’s financial purchases using credit card networks institution account  Offers 24-hour access to funds via ATMs; no need to wait in lines  Reduces the need to carry a lot of cash  Makes money transfers more easily available to families  Provides a pseudo-bank account—funds do not need to be withdrawn entirely as when using a check casher
  • 14. Benefits to employers  Reduces bank processing and check handling fees  Reduces check printing costs  Reduces likelihood of check fraud  Reduces check reconciliation costs  Increases employee productivity (no time off to cash or deposit paycheck)  Reduces lost/stolen check replacement costs
  • 15. Income taxes are:  Taxes paid on earnings  Mandatory deductions from earnings  Estimates of taxes owed  Known as progressive taxes; the higher the income earned, the higher the % rate of taxes  In contrast, sales taxes are regressive taxes; they impose same rate to all sales of goods; therefore; higher taxes (in comparison to earnings) are paid by those with lower incomes than those with higher.
  • 16. Used before beginning a job  W-4 – the Employee’s Withholding Allowance Certificate; information provided here determines the percentage of gross pay to be withheld for taxes  I-9 – the Employment Eligibility Verification form; information gathered in this form is for employers to verify eligibility of individuals for employment; helps avoid hiring undocumented workers or others who are not eligible to work in the United States  Social Security card or other identification
  • 17. irs link: W-4 simulation Complete simulation 1  Completed by employee for employer payroll records  Provides information for tax deductions  Marital status  Exemption status SIMILAR FORM - NC-4 FOR TAX WITHHOLDING FOR NORTH CAROLINA RESIDENTS irs link: calculate payroll taxes
  • 18. http://www.irs.gov/app/understandingTaxes/student/simulations.jsp  Complete Module 1: W-4
  • 19. Identity document  Required use for Federal Income Taxes
  • 20. I-9 proves your right to work in US if you are not a citizen.  Employment Identification and Verification Form Employers must complete and retain a Form I-9 for each individual they hire for employment for 3 years from date hired The form must be available for inspection by authorized U.S. Government officials (e.g., Department of Homeland Security, Department of Labor, Department of Justice). On the form, the employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine
  • 21. Used after end of year when filing income taxes  W-2 - states amount of money earned and taxes paid through previous year  Issued by employer to employee by January 31 of following year  Form 1040/1040A/1040EZ - common forms for filing federal income tax return  1099 Forms - Tax forms that report other sources of income earned during a tax year. 1099-INT for interest income, 1099-DIV for dividends on investments, and 1099-MISC for other sources of income such as contract labor
  • 23. Reports actual income and deductions for the tax year  Taxpayer must file by April 15th of the following year  Actual due compared to estimated payments  Results in either refund or additional payment to IRS
  • 24. SAMPLE 1099 FORM  Reports income not related to employment  Examples:  1099-DIV  Dividends  1099- INT  Interest income  1099-MISC  Contract labor  Distribution of pensions  Miscellaneous income
  • 25. http://www.irs.gov/app/understandingTaxes/student/simulations.jsp Complete Module 2 & 3: W-2, Form 1099-Int, 1040EZ  Complete Module 7: Standard Deduction
  • 26. Employees must retain appropriate records:  Records of deductible expenses, including receipts and bank statements  Social Security number serves two major purposes: (1) provides a record of your covered earnings for retirement and disability benefits and (2) serves as an identification number for the Internal Revenue Service
  • 27. Unwrap and slice the Payday candy bar. Read the ingredients list on the label. Note: Just as each candy slice contains some of each ingredient, so each paycheck contains specific kinds of information.  Have students scan FEFE 1.13.1.F1 information sheet “Understanding Your Paycheck” and complete the graphic organizers Appendix 4.01A, “Forms of Compensation,” Appendix 4.01B, “Money In, Money Out,” and Appendix 4.01C, “Employment, Wage and Tax Forms”  Have students complete the note-taking guide, FEFE 1.13.1. L1, “Understanding Your Paycheck and Tax Forms” as they view FEFE PowerPoint “Understanding your Paycheck.” Answer questions; discuss.  (In advance, download a blank Form W-4 and Form I-9 from www.irs.gov). Stop at slides 12 and 13 and guide students as they complete Form W-4 and Form I-9.
  • 28. " W-4, work some more"  ―W-2 your taxes are due".  1040EZ as in "easy" and  I-9-like the interstate- you travel from place to place and sometimes you travel across the border and you need to prove your citizenship, i.e. Canada, Mexico.
  • 29. Map your financial  Don’t borrow what future you can’t repay  Money doubles by the  Don’t expect ―Rule of 72‖ something for nothing  Your credit past is  High returns equal your credit future high risks  Start saving young  Know your take-  Stay insured home pay  Budget your money  Compare interest rates  Pay yourself first http://www.jumpstartcoalition.org/files2010/2010_J$_Calendar.pdf