Earned Income and Benefits

Earned Income and Benefits

• What is a minimun wage?• By law, what rate must overtime pay be?• List one advantage and one disadvantage of being a saleried

employee.

Earned Income and Benefits

Minimum wage is the lowest pay rate allowed by law for each hour of work.

Overtime pay is hours worked in addition to the standard work week.

A standard work week is forty-hours a week or 8 hours a day, 5 days a week.

Salary is a set amount of money people agree to work for.

Salaried employees often work more than 40 hours a week.

Earned Income and Benefits

A tip is a gift of money, often a percentage of the total bill, to a person for performing a service.

A commission is a set fee or a percentage of a sale paid to an employee instead of or in addition to salary wages.

Self-employment is working for yourself. People who are self-employeed are considered entrepreneurs.

Earned Income and Benefits

Advantages of owning a business:1. make your own decissions2. Increased Profits

Disadvantages of owning a business:1. You assume all the risk

Earned Income and Benefits

• Two categories of small businesses are lifestyle businesses and venture businesses. • A Lifestyle business is one where the owner intends to keep the

business small.• A Venture business is one where the owner intends the company to

grow and increase into a large business.• Venture capitalist is a people who invests in other peoples businesses

in hopes of earning a good return on investment (ROI).• Avocation is a secondary occupation someone enjoys.

Earned Income and Benefits

• Is being an entrepreneur right for you?• Are you self-motivated?• Do you like people?• Are you a leader?• Do you take responsibility?• Are you organized?• Are you a hard worker?• How do you make decissions?• Are you trustworthy?• Are you presistent?• Do you keep good records?

Earned Income and Benefits

• Given your invatory of skills, what is a small business idea you could start today?• What is a best why for a high-school student to make a signifcant income?

• HomeworkWho do we tip and what?Who earns commissions? What percent?

Spot Check

• What is a benefit?• What was your business plan?• What is a good way for a high school student to make a good amount

of money?

Benefits

• A benefit is a form of pay other than salary or wages.• Disposable income refers to the money a person has available to

spend or save after taxes have been paid.• Pay without work – times when an employee who is not working will

be paid.• Paid holidays• Sick leave – paid time away from work due to illness• Personal leave – paid time away from work for personal reasons

Bene’s (yeah!)

• Educational benefits – paying for or reimbursing the cost of education• Perks – catch all• Insurance• Health insurance (partial premium); you both pay• Group Life insurance; they pay• Supplemental life insurance; you pay• Disability insurance; various• Worker’s compensation; they pay

It’s all about the bene’s

• Profit sharing – allows employees to share in the profits of the business.• Stock option plans – Buying stock at a reduced amount.• Health Spending Account – Setting pre-taxed money aside to help

cover the cost of health care.• Health saving account (HSA) – various

• Other Deductions

• Define the following types of employer provided insurance plans - • Health insurance (partial premium)• Group Life insurance• Disability insurance• Worker’s compensation• HSA

Tips and Commissions

• What do we tip:• A cab driver• waiter/waitress• Porter• Trash man• Maid service

• Who earns commissions:

Unearned Income

What is unearned income?

What is interest?

Unearned Income

• Unearned income is money received from sources other than working in a job.• Interest is money earned on saving accounts and other funds.• A dividend is a portion of a corporation’s profits distributed to

stockholders.• Cash dividend – payment is money• Stock dividend – payment of more stock

• Stockholders are the people who buy stocks in a corporation.

Unearned Income

• Internal Revenue Service (IRS)• Variable income – money received form some type of activity other

than working under the direct control of another person or company.

• Would you rather have a million dollars, or a penny double it’s worth for a month with 30 calendar days?

Government Transfer Payment

• Government Transfer Payment is money and benefits received from local, state, or federal governments.• Entitlement Programs – Social security and Medicare.

Government Transfer Payment

• Social Security – Forced saving

Intro to Taxes

• How do you benefit from taxes?

Taxes

• Direct Tax – taxes paid directly to the government• Indirect Tax – charged on good or services bought by the consumer.

Taxes

• Use Taxes – paid by people who use certain good or services provided by the government• Excise Taxes – charged on the purchase of specific goods, such as

gasoline, cigarettes, and alcoholic beverages.• Sales Taxes – added to the purchase price of consumer goods and

services.• Income taxes – paid on earned and unearned income.• Progressive tax – the more you earn, the more you pay in taxes.

Tax Brackets

• http://www.bankrate.com/finance/taxes/tax-brackets.aspx

• http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/

• http://en.wikipedia.org/wiki/Capital_gains_tax#United_States

• http://www.moneychimp.com/features/capgain.htm

Taxes Based on Wealth

• Property taxes – paid by those who own real estate. Based on the assessed value, which is determined by the county or other taxing authority• Market value – Highest amount someone is willing to pay for

someone. • Business personal property – Tax on property used for business

purposes• Estate tax / Inheritance tax – Taxes leveled against the estate of a

person who has died or the person who inherits the estate.• Gift tax – taxes paid on gifts great than 13,000

• Employees may need to use paycheck stubs for things like loans and assistance applications. Paycheck stubs can help employees keep track of hours and budget expenses. They also help the employer by making sure employee information is correct. Some employers add a line on the pay stub stating it is the employees' responsibility to inform them if there are any changes that should be made such as address and withholding information. That way it is on every single paycheck stub and it cannot be said the employee was not informed of their responsibility.

• Some common abbreviations used on paycheck stubs: Gross: Earnings before deductions

• Net: Earnings after deductions• Current: Pay period earnings• YTD: Year-To-Date• REG: regular hours worked• OT: overtime hours worked• HOL: holiday hours worked• VAC: vacation time paid• SICK or FL: sick or family leave time

paid for• FICA: Employee's portion of Social

Security paid• FICA-MED: Medicare deductions• SWT or Fed: Federal withholding

Income Tax deductions• SWT or State: State Tax withheld• LT or Local Tax: County and/or City Tax

deductions• WC or Work Comp: workman's comp

contribution, usually paid by employer• INS or MED: insurance or medical

savings account deductions• Life: life insurance deductions• 401K or Ret: tax deferred retirement

contribution• Garnish: garnishment being taken

from employee's check due to money owed

• Gross Pay: the amount of money you make before deductions

•

Read more: http://www.surepayroll.com/online-payroll/sample-paycheck-stub.asp#ixzz3D29FmmKl

• http://www.surepayroll.com/calculator/payroll-tax-calculator.asp

South Carolina Tax Brackets

Tax Bracket (Single) Marginal Tax Rate$0+ 0.00%$2,850+ 3.00%$5,700+ 4.00%$8,550+ 5.00%$11,400+ 6.00%$14,250+ 7.00%

Tax Bracket (Sin Marginal Tax Rate$0+ 0.00%$2,850+ 3.00%$5,700+ 4.00%$8,550+ 5.00%$11,400+ 6.00%$14,250+ 7.00%

2014 South Carolina Income Tax Table 2013 - 2014

FICA

• The Social Security tax rate of 12.4%, split evenly between employers and employees, remains the same. • Employees and employers also each pay a 1.45% Medicare tax on all

wages with no cap. The self-employed pay a combined Medicare tax of 2.9%.

TAKE HOME PAY

• Calculate the following for each person:• Take home pay• Federal Withholding• Tax Withholding• FICA• FICA – Med

1. Fast food worker, making 7.50/hour, working 30 hours a week. Paid bi-weekly.

2. Software Engineering I at a salary or 45,000/year. Paid bi-monthly.

3. Teacher’s Assistant at a salary of 23,000/year. Paid monthly.

4. Dentist (self-employed), who earned 190,000. Paid weekly.

5. Professional Athlete at a salary of 3.5 million a year, paid 16 times a year.

What do you spend you money on?

• http://data.bls.gov/cgi-bin/surveymost?ap

• www.Zillow.com

• www.google.com