2.1 Federal Income Tax. 2.1 Federal Income Tax, Slide 1 of 15

Transcription

1 2.1 Federal Income Tax 2.1 Federal Income Tax, Slide 1 of 15

2 Section Objective The focus of this lesson is to learn how to use tables to find the amount withheld for federal income tax 2.1 Federal Income Tax, Slide 2 of 15

3 Key Words to Know Federal Income Tax (FIT) Money withheld by an employer from an employee s paycheck 2.1 Federal Income Tax, Slide 3 of 43

4 FIT Is calculated using the tables in the back of the book. The tables are displayed based on WEEKLY salary. There are separate tables for married and singles. 2.1 Federal Income Tax, Slide 4 of 43

5 Key Words to Know Allowances The number of dependants you claim for purpose of calculating federal income taxes. 2.1 Federal Income Tax, Slide 5 of 43

6 Key Words to Know Withholding The amount of money that is held from your paycheck. 2.1 Federal Income Tax, Slide 6 of 43

7 Annual Salary The salary that you make YEARLY. Bi-weekly Every other week Semi-monthly Twice a month 2.1 Federal Income Tax, Slide 7 of 43

8 Gross Pay The amount of your salary before deductions. Net Pay The amount of your paycheck. 2.1 Federal Income Tax, Slide 8 of 43

9 If you get paid every week, how many checks will you get in annually? If you get paid every month, how many checks will you get in annually? If you get paid every other week, how many checks will you get in annually? If you get paid twice a month, how many checks will you get in annually? 2.1 Federal Income Tax, Slide 9 of 43

10 If you get paid $300 every week, what would be your annual salary? If you get paid $62,000 annually, what would be your monthly pay? If you get paid $2,500 every other week, what would be your annual salary? If you get paid $40,000 annually, what would be your semi-monthly pay? 2.1 Federal Income Tax, Slide 10 of 43

11 If Mike makes $125 per week, he is single and claims 1 allowance, what is his weekly FIT withholding? 2.1 Federal Income Tax, Slide 11 of 43

12 If Paul makes $985 per week, is married and claims 6 allowance, what is his weekly FIT withholding? 2.1 Federal Income Tax, Slide 12 of 43

13 Example 1 Carla Garza s annual pay is $39,260. She is married and claims 2 allowances herself and her husband. What amount will be withheld from Garza s pay for FIT? 2.1 Federal Income Tax, Slide 13 of 43

14 WHAT DO I DO NOW? HER PAY IS ANNUAL, BUT THE TABLE IS IN WEEKS Federal Income Tax, Slide 14 of 15

15 Example 1 Answer Step 1: Calculate Weekly Salary. $ Federal Income Tax, Slide 15 of 15

16 Step 2: Find the income range from the federal tax tables 2.1 Federal Income Tax, Slide 16 of 15

17 Example 2 Lance Han s annual gross pay is $31,252. He is single and claims 4 allowance. What amount will be withheld from Han s pay for FIT? 2.1 Federal Income Tax, Slide 17 of 43

18 Example 1 Answer Step 1: Calculate Weekly Salary. $ Federal Income Tax, Slide 18 of 15

19 Step 2: 2.1 Federal Income Tax, Slide 19 of 15

20 Assuming they are married, complete the following table: Employee Weekly Income Allowances Amount Withheld D. Caine A. Kim D. Cadena H. Nguyen G. Ginn K. Morris C. Dubinski Federal Income Tax, Slide 20 of 15

21 2.2 STATE INCOME TAX 2.1 Federal Income Tax, Slide 21 of 15

22 SECTION OBJECTIVE The focus of this lesson is to learn how to calculate state income tax based on a straight percent basis 2.1 Federal Income Tax, Slide 22 of 15

23 KEY WORDS TO KNOW personal exemptions (p. 119) The number of people an employee supports, on which taxes are based, also called withholding allowances 2.1 Federal Income Tax, Slide 23 of 43

24 KEY WORDS TO KNOW Taxable wages ONLY used for state tax purpose, taxable wages are your wages minus (-) your personal exemptions 2.1 Federal Income Tax, Slide 24 of 43

25 How do I calculate taxable wages Taxable Wages = Annual Gross Pay Personal Exemptions 2.1 Federal Income Tax, Slide 25 of 15

26 Patricia Line s gross pay is $65,800 a year. Line takes a married exemption for herself and her husband. What are her taxable wages? 2.1 Federal Income Tax, Slide 26 of 43

27 Tomoko Nakazawa. Earns $38,657 annually. Married, no dependents. What are her taxable wages? 2.1 Federal Income Tax, Slide 27 of 43

28 Stephanie Vanderham. Earns $96,315annually. Married, 4 children. What are her taxable wages? 2.1 Federal Income Tax, Slide 28 of 43

29 How do I calculate annual taxes withheld Annual Taxes Withheld = Taxable Wages X Tax Rate 2.1 Federal Income Tax, Slide 29 of 15

30 EXAMPLE 1 Patricia Line s gross pay is $65,800 a year. The state income tax rate is 3 percent of taxable wages. Line takes a married exemption for herself and her husband. How much is withheld from her gross pay for state income tax within the year. 2.1 Federal Income Tax, Slide 30 of 43

31 EXAMPLE 1 (CONTD) Personal Exemptions Single: $2,000 Married: 4,000 Each Dependent: 2, Federal Income Tax, Slide 31 of 43

32 EXAMPLE 1 ANSWER: Step 1: Find the taxable wages. Annual Gross Pay Personal Exemptions $65, $4, = $61, Federal Income Tax, Slide 32 of 43

33 EXAMPLE 1 ANSWER: Find the annual tax withheld. Taxable Wages Tax Rate $61, % = $1, How much monthly? $ Federal Income Tax, Slide 33 of 43

34 EXAMPLE 2 Tomoko Nakazawa. Earns $38,657 annually. Married, no dependents. State Tax rate of 5% How much does she pay annually in state tax? 2.1 Federal Income Tax, Slide 34 of 43

35 EXAMPLE 1 ANSWER: Annual Tax $1, If she was paid weekly, how much would be withheld each paycheck? 2.1 Federal Income Tax, Slide 35 of 43

36 ON YOUR OWN 1 Paul Chamello earns $168,000. He is single. His personal exemptions include himself and his five children. The state tax rate is 2.5 percent of taxable income. What amount is withheld yearly for state income tax? 2.1 Federal Income Tax, Slide 36 of 43

37 EXAMPLE 1 ANSWER: Yearly State Income Tax $3,900 If her gets paid MONTHLY, how much withholdings each pay check? $ Federal Income Tax, Slide 37 of 43