Income and
Taxes
Lawns R Us
@2008 Oklahoma State
Department of Education.
Objectives
 Identify
the different kinds of payroll
deductions.
 Explain the difference between gross and
net income.
 Find the net income.
Income
 Gross
Income: wages or salary before
deductions for taxes and other purposes.
 Net
Income: commonly called “take
home pay”; it is your income after all
deductions and exemptions.
Paycheck Deductions

Deduction: anything that is subtracted
from the gross amount. Can either be
voluntary or required.






Taxes: state and federal (required)
Insurance: health, life, or dental
Stock purchases
Meals or uniforms
Retirement
Other ideas?
Paycheck Exemptions
 Exemption:
Legal allowances that reduce
the amount of income taxes subtracted
from your gross income.

You fill out a form when you are hired. You
can have federal withholding allowances
for yourself, your spouse, and your
dependents.
Payroll Taxes
 FICA
(another name for Social Security)
stands for Federal Insurance
Contributions Act that covers both Social
Security and Medicare.


Federal programs providing benefits for
people who are retired, disabled, or
children or deceased workers.
Any business with more than 1 employee
must pay FICA (employer pays ½ and
employee pays ½.)
State & Federal Taxes
 Actual
amount of income tax taken out
each month depends on a person’s
income. Employers use information called
“tax tables.”

State payroll taxes vary greatly from state to
state, but federal tax rates are the same for
everyone living in the United States.
Why Taxes?
 Paying
taxes is a part of the responsibility
of earning an incomes.
 Taxes are used to support a variety of
programs, such as schools, national
defense, and public welfare.
 We all enjoy the benefits from taxes.
Complete Wksht 1.2 and
Activity 1.2.1
 Answer
all of the questions on the
worksheet!
Answers to Lesson 1.2
 1.
The difference between gross and net
income is gross income is salary before
deductions and net income is your
income after all deductions and
exemptions.
Answers to Lesson 1.2
 2.
Some of the different kinds of
deductions that an employer may deduct
are:






State Taxes (required)
Federal Taxes (required)
FICA (required)
Retirement (optional)
Uniforms, meals, stock purchases (optional)
What else?
Answers to Lesson 1.2
 3.

What is net pay?
A. The amount of money left after all
deductions have been taken.
 4.
What 2 taxes are included within the
Federal Insurance Contribution Act (FICA)?

B. Social Security & Medicare.
Paycheck Deductions –
Activity 1.2.1
 1.
The employer is Lawns R Us.
 2. Zooma earned $294 before
deductions.
 3. Zooma’s hourly wage is $240/40hours, is
$6 an hour.
 4. Zooma’s deductions are: income tax,
state tax, FICA, and meals.
Paycheck Deductions –
Activity 1.2.1
 5.
Divide Zooma’s net pay by her gross is
pay $223.43/$294.00 = .76, which is 76%.
 6. To find the percent divide the tax by
her gross pay



Federal Tax: $42.65/$294.00 = .145, which is
14.5%.
State Tax: $8.67/$294.00 = .0295, which is
2.95%.
FICA: $16.25/$294.00 = .055, which is 5.53%
Paycheck Deductions –
Activity 1.2.1
 7.
The pay period is between 8-6 to 8-12.
 8. $372.01 is the income tax that has
been taken out of Jennifer’s paycheck so
far this year.
 9. Jennifer contributed $5 to a retirement
plan this paycheck.
 10. Jennifer’s take-home pay was $296.26.
Paycheck Deductions –
Activity 1.2.1


11. To find the percent of Jennifer’s takehome pay divide her net pay by her gross
pay, $296.26/$374.00, which is .792 or 79.2%.
12. To find the percent divide the tax by her
gross pay



Federal Tax: $30.75/$374.00 = .0822, which is
8.22%.
State Tax: $9.50/$374.00 = .0254, which is 2.54%.
FICA: $22.49/$374.00 = .0601, which is 6.01%
Summary
 You





should now know
The difference between net and gross pay
The difference between deductions and
exemptions
The different types of payroll deductions
How to find the percent of net pay
How to find the percent of federal tax, state
tax, and FICA.
Resources
 Entire

http://sde.state.ok.us/curriculum/PFLP/Stud
ent/Standard_1/module_1.2.pdf
 Basic

Lesson plan:
information on Payroll taxes:
http://taxes.about.com/od/payroll/qt/payr
oll_basics.htm
 Internal

Revenue Service
http://www.irs.gov/