Take-Home Newsletter
Activity Suggestions
Directions: Using the information below, calculate each person’s net monthly income (NMI).
1. Monty is a retail store manager. His annual salary is $32,000.
Gross Annual Income (GAI) $ _______________
Gross Monthly Income (GAI divided by 12) $ _______________
Monthly Federal Income Tax $ 667.67
Monthly Social Security (FICA) $
213.33
Monthly Medicare $ 38.67
Total Monthly Deductions $ _______________
Monty’s NMI = (GMI minus deductions)
$ _______________
2. Piper enjoys working for the electric company. Her annual salary is $42,000.
Gross Annual Income (GAI) $ _______________
Gross Monthly Income (GAI divided by 12) $ _______________
Monthly Federal Income Tax $ 875.00
Monthly Social Security (FICA) $
280.00
Monthly Medicare $ 50.75
Total Monthly Deductions $ _______________
Piper’s NMI = (GMI minus deductions) $ _______________
3. Ian works at the local golf course while going to school. He makes $12,000 a year.
Gross Annual Income (GAI) $ _______________
Gross Monthly Income (GAI divided by 12) $ _______________
Monthly Federal Income Tax $ 120.00
Monthly Social Security (FICA) $
80.00
Monthly Medicare $ 14.50
Total Monthly Deductions $ _______________
Ian’s NMI = (GMI minus deductions) Unit Two
Take-Home Newsletter
Taxes and My Salary
Dear Parent or Guardian:
As a participant in Unit Two of the economics education program JA Finance Park®, your child will learn what
taxes are, why they are important, and how they affect income and expenses. Your child will discover what is
meant by net monthly income and how this income is calculated.
“Where is all my money?” is a typical question first-time wage earners ask. Students need to know that income
is reduced by the amount of tax owed, and that income taxes are automatically withheld from paychecks and
set aside in business accounts to be paid to the Internal Revenue Service (IRS) and state government. They also
should know that U.S. citizens and residents are required to file income tax forms annually; they must pay any
additional tax owed to the IRS or state government or apply for a refund if too much tax was withheld from their
paychecks.
Students may know something about state and local sales taxes. But, do they understand that because of sales
taxes, we have an additional cost on nearly everything we purchase, including utilities such as electricity, cable
TV, and telephone service? Can they tell you what the tax rate is for their area? Can they figure the sales tax on
items they buy?
Local property taxes on a house, condominium, factory, and land are probably less familiar. This tax is based
on property values and is determined by local government. Students also may be unaware of how tax money
is spent. Tax money collected by federal, state, and local governments pays for many things, such as roads,
schools, police and fire protection, armed forces, parks, and Social Security.
During the JA Finance Park simulation, students will be required to subtract federal income tax from the money
they receive in wages. Students must calculate their net monthly income using income tax, Social Security,
and Medicare deductions. To understand exactly how much money is available when preparing their budgets,
students must understand how taxes affect them.
$ _______________
4. Elise writes a weekly column for the newspaper. She receives $1,000 for each column.
Gross Annual Income (GAI) $ _______________
Gross Monthly Income (GAI divided by 12) $ _______________
Monthly Federal Income Tax $
1,083.33
Monthly Social Security (FICA) $
346.67
Monthly Medicare $ 62.83
Total Monthly Deductions $ _______________
Elise’s NMI = (GMI minus deductions) $ _______________
Acknowledgement
Junior Achievement gratefully acknowledges the Office of Juvenile Justice and Delinquency Prevention, Office of Justice Programs,
U.S. Department of Justice for its dedication to the development and implementation of JA Finance Park®. Junior Achievement
appreciates its partnership with the Office of Juvenile Justice and Delinquency Prevention to provide vital, innovative programs that
inspire and prepare young people to succeed in a global economy.
©2011 Junior Achievement USA, M1109B, Take-Home Newsletter, Unit 2
Overview for Students
Graphic Organizer
What is the effect of taxes on our income and purchases?
Directions: After reading the Overview for Students, complete the Graphic Organizer.
What are taxes?
Taxes are funds, or money, that local, state, and federal governments collect to pay their bills.
What is it?
Who pays taxes?
People who hold a job, buy things, or own property will pay taxes. In short, just about everyone pays taxes.
How do I pay taxes?
Paying taxes is an almost invisible activity for most of us: sales tax is automatically included in the total
price collected at a store or in a utility bill (and later sent to the local or state tax collectors). When we
receive a paycheck, income taxes are automatically withheld by our employer (and set aside in a tax account
to be paid to the Internal Revenue Service, or IRS). Once a year, we are required to file an income tax form
and send in any additional tax still owed to the IRS or apply for a refund if too much tax was withheld from
our pay.
How am I affected by taxes?
Taxes affect us all. With a state or local sales tax, we have an additional cost on nearly everything we
purchase. Our take-home pay is reduced by the amount of income tax we owe. Property, such as a car, house,
or business, also may be taxed. We pay taxes on utilities, such as electricity, cable, and telephone service.
What is all that money used for? A whole range of “free” services. From the roads we travel on, the public
schools we attend, the police and fire protection we depend on, the armed forces that protect our country, and
the Social Security paid to our grandparents, to the parks we play in – all are funded with tax money.
Uses
Where does it come from?
(Who pays it?)
Why do I need to know about taxes?
If you plan to work and make major purchases or buy property, you need to understand how taxes will affect
your take-home pay. During the JA Finance Park simulation, you will be required to pay income and payroll
(Social Security and Medicare) taxes on the money you receive in wages. You must, therefore, be able to
calculate your net monthly income to know exactly how much of your income you’ll have left to spend
after taxes.
Taxable items
Take-Home Newsletter
Non-taxable items
Take-Home Newsletter