Section 2.1 Calculating Taxes
63
Step 3: The cell where the row and column intersect shows the amount of
money that will be withheld from Chloe’s weekly paycheck.
$61 will be withheld each week from Chloe’s paycheck for federal income taxes
Check It
Brandon works as an animal trainer, training service dogs for people
with disabilities. He earns $625.27 per week. Brandon is single and claims one
withholding allowance. What is the amount of federal income tax that will be
withheld from Brandon’s weekly paycheck?
Social Security and Medicare Deductions
Employers are required to deduct a percentage of employee income for Social
Security and Medicare. Social Security taxes pay for retirement and disability
benefi ts. Medicare provides health insurance for people over 65 years of age.
This program also covers individuals with certain disabilities. Together, these taxes
are known as FICA taxes. FICA stands for the Federal Insurance Contributions Act.
FICA taxes are a percentage of the employee’s gross pay that is withheld
from each paycheck. The employer withholds 6.2% from each paycheck for
Social Security tax. The amount earned over $106,800 is not subject to Social
Security tax. This is often called the Social Security cap. For example, if someone
earns $183,085 per year, Social Security tax is deducted for the fi rst seven months
of the year. What that person earns for the remainder of the year does not have
Social Security tax deducted from it.
Social Security tax = gross pay × tax rate
The Social Security tax is shared by the employee and the employer. The
employer pays a matching amount of Social Security taxes for each employee.
Therefore, the employer will also pay 6.2% of the employee’s gross pay.
Career Discovery
Government & Public Administration
Careers and Math Skills
Government and public administrations career areas involve working in
a governmental position or on issues related to government matters. Seven
pathways make up this cluster. These pathways include government, national
security, foreign service, planning, revenue and taxation, regulation, and
public management and administration. Places of work range from nonprofi t
organizations to overseas locations or local, state, or federal governments.
Budgets are a big part of many public administration positions. How
would having a strong understanding of fi nance help those seeking a career in
government or public administration?