Methods for Paying Employees:
- Paper Paycheck: Comes with your stub and you have to bring it to your bank to get it deposited or cashed. Characteristics include, paper form, address, employment, dollar amount. - Direct Deposit: Your employer wires your money into your account, you don’t have to do anything. - Payroll Card: The third and newest method to pay employees. It is a prepaid card that is offered to employees as an alternative to paper paychecks or directly depositing wages into an employee’s depository institution account. Characteristics include, a smart card- Have money electronically loaded upon onto them each pay period with funds automatically deducted from the balance when a purchase is made. The payroll cards function like debit cards. |
Examples of Fees Charged by Payroll Companies:
- Protection: Regulation E, or the electronic transfer act allows any fraudulent transactions if reported within 48 hours, you will only be responsible for $50. - Benefits to employers: Lower internal costs associated with producing, handling, and distributing paychecks is eliminated. - Benefit to employees: Access to an electronic monthly statement of transactions, option for a second card, increased safety (no need to carry around cash) 24 hour access to funds, no check cashing fees each pay period. |
Taxes:
- Taxes: Are compulsory charges imposed on citizens by local, state, and federal governments used to fund public goods and services. - Internal Revenue Service: the governmental agency responsible for collecting federal taxes, issuing regulations, and enforcing tax laws written by the United States Congress. - Governmental jobs are funded by tax dollars such as the post office, any government job, public schools, police and fire department, snow plowing, and state funded parks. - The United States Congress is in charge of writing tax laws. |
Employment Forms:
- Form W-4: - Withholding Allowance Certificate - Allowance: Used to determine the amount of federal taxes withheld from the paycheck - Dependent: Is a person who relies on the taxpayer for financial support. - Form I-9: - Employment Verification Form used to identify employees and to avoid undocumented workers. - Examples of documentation: Drivers license, passport, Social Security card, and birth certificate. |
Reading A Paycheck Stub:
- Paycheck Stub: A paycheck stub lists the paycheck deductions as well as other important information. - Personal Information: States the employee’s full name, address, and Social Security or Employee Identification number. - Gross Pay: The total amount of money earned during the pay period before deductions. If a person earns an hourly wage, gross pay is calculated by multiplying the number of hours worked by the wage. - Net Pay: The amount of money left after all deductions have been withheld from the gross pay earned during the pay period. - Deductions: This is the amount of money that is subtracted from the gross pay for other taxes, medical benefits, or retirement benefits. |
Required and Optional Deductions:
- Federal Withholding Tax: The amount required by law for employers to withhold from earned wages to pay taxes. This represents the largest deduction withheld from an employee’s gross income. The amount withheld depends upon two things: the amount of money earned and the information provided on the form W-4. - State Withholding Tax: The percentage deducted from an individual’s paycheck to assist in funding government agencies within the state. The percentage of deduction depends upon the amount of gross income the employee has earned. - FICA: (Federal Insurance Contributions Act) United States payroll (or employment) tax imposed on both employees and employers to fund social security and medicare. - Fed OASDI/EE or Social Security: The nations retirement program. This tax helps provide retirement income for elderly and pays disability benefits. Social Security taxes are based upon a percentage (6.2%) of the employee's gross income. - Fed MED/EE or Medicare: The nation’s health care program for the elderly and disabled. This tax provides hospital and medicine insurance to those who qualify. - Retirement Plan: The amount an employee contributes each pay period to a retirement plan. A specified percentage of the contribution is often matched by the employer. This may be a 401k, state, or local retirement. - Medical: The amount taken from the employee’s paycheck for medical benefits. This occurs when the employer has a medical plan for employees, but does not pay full coverage for his/her benefits. - Year-to-Date: Totals all of the deductions which have been withheld from an individual's paycheck from llama January 1 to the last of the pay period indicated on the paycheck stub. So she gets paid every month. |
Paychecks and Taxes Video:
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