15 Income Earning and Reporting
15 demonstrate knowledge of income earning and reporting
15a Personal Choices Impact Earnings
Personal choices about investment in oneself as human capital through education, training, and skill development impact earnings.
What is human capital?
Knowledge and skills a person possesses
How Can Individuals Invest in Their Own Human Capital?
People invest in their own human capital when they gain knowledge and skills through education, training, and experience
How Does Human Capital Affect Income?
People with more education and skills tend to earn higher incomes than uneducated and unskilled workers.
15b Differentiating Among Sources of Income
People can receive income from a variety of sources
What are some of the ways to earn income?Earned: Salary Hourly wages Overtime Tips Commissions Bonuses Piece rate
Unearned: Interest Return on
investment Inheritance gifts
15c Calculate Net Pay
Net pay is what remains after voluntary and required deductions are subtracted from gross pay
What is gross pay?
Total money earned before deductions
Some deductions are required Some may be voluntary
What is net pay?What are common deductions from gross pay that affect net pay?
Net pay results when deductions such as the following are subtracted from gross pay:
Federal Insurance Contributions Act (FICA) contributions
State and Federal Taxes Insurance Savings Retirement Medical reimbursement (pre-tax deduction) Child care reimbursement
15d Employee Benefits & Incentives
Employees may have a variety of benefits and incentives to consider
What are employee benefits?
Benefits are part of an employee’s compensation, over and above wages or salary. They add to the financial value of the job
Examples of benefits:› Matching contributions to tax-sheltered annuities, such as
401(k) and 403(b) retirment savings plans› Savings plans› Parking› Health insurance plans (medical, dental)› Child care› Elder care› Paid vacation› Paid sick days› Profit sharing
What are employee incentives?
Incentives are offered as motivation for employees to perform well and may include:› Bonuses› Profit sharing› Free travel or merchandise
15e W-4 form
The information a worker provides on the W-4 form impacts federal tax deductions and personal income
Why is it important for the W-4 form to be completed accurately?
The information provided on the W-4 form determines how much is withheld from one’s gross pay.