Page on why creating a budget is so important



Name: __________________ Period: ____

NET INCOME

Directions: Assume you are a Sales Associate at your local retail store. You earn $11.50 per hour. You work full time (40 hrs per week) Calculate your earnings for your annual, monthly and weekly pay below….

Federal Income Tax (FIT) * Obtain a copy of the FIT table from your teacher

According to the federal income tax table (attached) as a single Sales Associate claiming one allowance, earning $________ weekly, I will pay _$____ per week for federal income taxes. If I multiply this amount by 4 weeks, I will pay approximately $_____ per month for Federal Income Taxes.

State Tax and Taxable Wages

Personal Exemptions: Single $1500 Married $3000 Dependents $700

Formula 1: Find your Taxable Wages

Annual Gross Pay – Personal Exemptions = Taxable Wages

$_________ - $_________ = $__________

-- 1% on the first $6,622 of taxable income

-- 2% on taxable income between $6,623 and $15,698

-- 4% on taxable income between $15,699 and $24,776

-- 6% on taxable income between $24,777 and $34,394

-- 8% on taxable income between $34,395 and $43,467

-- 9.3% on taxable income of $43,468 and above.-- 1% on the first $6,622 of taxable income

-- 2% on taxable income between $6,623 and $15,698

-- 4% on taxable income between $15,699 and $24,776

-- 6% on taxable income between $24,777 and $34,394

-- 8% on taxable income between $34,395 and $43,467

-- 9.3% on taxable income of $43,468 and above.-- 1% on the first $6,622 of taxable income

-- 2% on taxable income between $6,623 and $15,698

-- 4% on taxable income between $15,699 and $24,776

-- 6% on taxable income between $24,777 and $34,394

-- 8% on taxable income between $34,395 and $43,467

-- 9.3% on taxable income of $43,468 and above.

Formula 2:Find your Annual Tax Withheld(*Assuming a state income tax of 3%)

Taxable Wages X Tax Rate = Annual Tax Withheld

$______ X _____ = $_________

Formula 3: Find your tax withheld per month

Annual Tax Withheld / Number of Pay Periods per Year = Tax Withheld per month

$_______ / 12 months = _______

Social Security Tax *Assume you pay into social security.

Formula: Determine how much you pay into Social Security.

*Social Security rate is 6.2 percent

Monthly Gross Pay X Tax Rate = Monthly Social Security Withheld

$_________ X _______ = $___________

Medicare Tax *Medicare tax rate is 1.45 percent of all your annual income.

Formula:

Monthly Gross Pay X Tax Rate = Monthly Medicare withheld

$_______ X ______ = $___________

Medical Insurance

Many businesses offer group insurance plans to their employees. Because there are so many different plans, assume a single plan health insurance costing $3685 annually. Employer covers 80 percent of the cost…

Formula 1: If your employer pays 80%, calculate your percent

100% - Employers Contribution % = Employee Contribution%

____% - _______% = ______%

Formula 2: Calculate your Annual Employees share

Annual health cost X Employees Contribution = Annual Employees Share

$_____ X _____% = ________

Formula 3: Find the deductions for benefits per month

Annual Employees Share / Number of Pay periods per year = Deduction per pay Period

$______ / 12 months = $______ monthly

Net Pay

Formula 1: Calculate your total deductions using finding from above

Federal State Social Medical Total

Income Tax + Tax + Security + Medicare + Insurance =Deductions

$_______ + $___ + $_____ + $______ + $ _____ = $_______

Formula 2: Calculate Net Pay

Monthly Gross Pay – Total Deductions = Net Pay

$____________ - $__________ =$ ______

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My gross income is $________ annually (per year), $______ monthly or $______ weekly

$________ per month for Federal Income taxes

$________ per month for State Tax

$________ per month for Social Security

$________ per month for Medicare

$________ per month for medical insurance.

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