Notes
Careers and pay
- Education, training, skills and experience affect earnings. On average more education or training is linked to higher pay and lower unemployment, but it is not a guarantee.
- Compare the cost of training with the expected pay increase. Opportunity cost is the value of the best option you give up.
Gross pay, net pay and deductions
- $\text{Net pay} = \text{Gross pay} - \text{Deductions}$. Budget with net pay.
- Deductions include income tax, FICA (Social Security and Medicare), and voluntary items such as health insurance or retirement contributions.
- Hourly pay = rate times hours; overtime is often $1.5 \times$ the rate beyond 40 hours; a salary is a fixed yearly amount split into equal paychecks.
Tax forms
- The W-4 tells your employer how much income tax to withhold. The W-2 reports a year of pay and withholding and is used to file taxes.
- Too much withheld means a refund; too little means you owe.
Side income
- Self-employed workers usually get a 1099, and no taxes are withheld. Side income is generally taxable. Profit = revenue minus expenses.
Topics in this unit
Each topic has its own short notes and practice.
Practice
The W-4 controls withholding; the W-2 is the year-end report.
$14 \times 35 = 490$.
25% of $2,000 is $500, and $2000 - 500 = 1500$.
Taxes are required; retirement contributions are chosen.
Regular $800 plus overtime $2 \times 20 \times 1.5 = 60$ gives $860.
Profit is $1000 - 250 = 750$. Self-employed income is generally taxable, and no employer withholds for it.
Free response
Write your answer first, then open the scoring guide.
Free-response question
Jada works part time at $12 per hour. One week she works 30 hours. Her employer withholds 10% of gross pay for income tax and 8% for payroll taxes.
(a) Calculate Jada's gross pay for the week.
Show the answer and scoring guide
$12 \times 30 = 360$, so gross pay is $360.
Check off the points you earned:
(b) Calculate the total deductions and her net pay.
Show the answer and scoring guide
Deductions are 18% of $360: $360 \times 0.18 = 64.80$, so $64.80. Net pay $= 360 - 64.80 = 295.20$, so $295.20.
Check off the points you earned:
(c) Jada also earns $200 tutoring on weekends and spends $40 on materials. Find her profit and explain one tax consideration.
Show the answer and scoring guide
Profit $= 200 - 40 = 160$, so $160. No taxes are withheld from self-employed income, so she should set some money aside because the profit is generally taxable.
Check off the points you earned: