EC - Income Tax Lesson
Income Tax
Introduction
Wait… how much is taken out of my paycheck?? Your gross pay is not the actual take-home pay that you receive in your paycheck. The amount of money after deductions such as taxes and health care plans is called your net pay. This is what you get to spend or stash away into savings. Taxes are used for a variety of things from different parts of the government. There are federal income taxes and also state income taxes. Let’s take a look at these topics since you may like to know where your money goes and what your money is going towards!
Federal Income Tax
Employers are required by law to withhold a certain amount of your pay for federal income tax and state income tax. This amount is an estimate of how much you will need to pay in taxes for the year. If they take out too much, then you will get a refund later on, but if they don’t take out enough, then you will owe money to the government!
Click through the interactive below, or look at the transcript, to practice calculating federal income tax. You will need to use the tables linked below. You may print these tables if you would like to. Please pay attention to which table you need to use (married vs single). Try to find the answers to the practice questions on your own before checking the solutions.
Click here to download the Income Tax Allowances Charts. Links to an external site.
Click here to view the transcript of the above interactive activity. Links to an external site.
State Taxes
State taxes are determined in a different manner. Click through the interactive below, or look at the transcript, to practice calculating state income tax. You will need to use the information in the following table.
Click here to view the transcript of the above interactive activity.
Links to an external site.
⭐️ Help Video:
If you found any of these problems challenging, here is a video that will go over one of the answers.
Income Tax Practice Problems
Use the tax charts provided above to answer the following practice questions. Click on the gray arrow in the bottom right corner to submit your answer to each question and move on to the next question.
Social Security
What is social security? How did it start?
Social security was described as a "contract between generations."
The current generation of workers would pay into a fund while the retirees would take in a monthly stipend. Upon reaching the age of 65, individuals would start receiving payments based on the amount contributed over the years. Employees would have one percent of their incomes automatically deducted from their paychecks, a rate that was originally envisioned to reach 3%. Employers would also contribute to their employees. The plan was mandatory except for individuals in exempted professions. Roosevelt knew that this reform would be permanent. He guessed that once workers had paid into a system for decades, they would expect to receive their checks. Woe to the politician who tried to end the system once it was in place.
A committee of staffers led by Secretary of Labor Frances Perkins, the first female ever to hold a Cabinet position, penned the Social Security Act. In addition to providing old-age pensions, the legislation created a safety net for other Americans in distress. Unemployment insurance was part of the plan, to be funded by employers. The federal government also offered to match state funds for the blind and for job training for the physically disabled. Unmarried women with dependent children also received funds under the Social Security Act. President Roosevelt signed the Social Security Act into law in 1935. Designed to pay retired workers age 65 or older a continuing income after retirement, this act helped Americans breathe easier about their futures.
Source Links to an external site.
IMAGES CREATED BY GAVS