Income Breakdown Slides Income Breakdown
Gross vs. Net Pay, Wages, & NYC Taxes
The $300 Question
"If you earn $15 / hour and work 20 hours, your actual paycheck will be less than $300."
But... why does this happen?
Let's demystify where your hard-earned money actually goes!
Gross Income
The Starting Point
Definition
The total amount of money you earn before any taxes, retirement contributions, or other deductions are taken out.
Basic Formula
Hourly Rate × Hours Worked
"The Big Number"
This is the figure companies use when offering jobs (e.g., "$18 an hour" or "$50,000 a year").
Salary vs. Hourly Wages
Two Ways to Earn
Hourly Wage
Paid a specific rate for every hour you physically work.
Earns 1.5x regular pay for Overtime (hours worked over 40 per week).
Paycheck size varies based on scheduled shifts.
Example: $16.00 / hour
Salary
A fixed annual rate agreed upon in an employment contract.
Divided equally over annual pay periods (e.g., 24 or 26 paychecks).
Generally exempt from overtime (same pay whether working 35 or 50 hours).
Example: $52,000 / year
Paid Time Off (PTO)
The Best Kind of Day Off
What is PTO?
A benefit that allows employees to take time off work for vacation, illness, or personal reasons while still receiving their regular wages.
Why is it valuable?
It prevents loss of income when you are sick or resting, ensuring financial stability.
How Do You Get It?
For Salaried Roles:
Typically granted as a lump sum yearly (e.g., "15 days of PTO per year").
For Hourly Roles:
Often **accrued** based on hours worked (e.g., earn 1 hour of PTO for every 30 hours worked).
The Shrinkage: Deductions
Where the money goes
Mandatory Deductions
Required by law. Employers must take these out of your check.
Federal Income Tax (Supports US budget)NYS State Tax (Supports New York programs)NYC Local Tax (Exclusive to NYC residents!)FICA Taxes (Social Security & Medicare)
Voluntary Deductions
Choices you opt into. You authorize the employer to take these out.
Health Insurance (Medical, dental, vision)Retirement (401k) (Investing in your future)NYC Commuter Transit (Pre-tax MetroCards)
Filing Taxes: State vs. Federal
Two Different Levels
Federal Income Tax
• Paid to the **Internal Revenue Service (IRS)**.
• Applies equally to all citizens across the entire United States.
• Funds national infrastructure, defense, federal courts, and national parks.
State & NYC Tax
• Paid to the NYS Department of Taxation.
• NYS Tax funds state highways, state universities, and state police.
• NYC Local Tax specifically funds the subway/MTA system, local libraries, NYPD/FDNY, and city parks.
💡 Local Identity Matters!
Only official residents of NYC pay the NYC local income tax!
Form 1040 & Form IT-201
Settling Up Annually
Federal: Form 1040
The standard document Americans use by April 15th to report federal income and calculate their final IRS tax bill.
NYS & NYC: Form IT-201
New York residents file a separate **Form IT-201** to report and reconcile state and NYC local taxes.
The Calculation Outcome
Paid Too Much?
You get a **Tax Refund** check from the US or NYS!
Paid Too Little?
You must pay the remaining balance due (**Tax Bill**).
Net Income
The Payday Reality
"Take-Home Pay"
The amount of money that actually lands in your bank account to spend, save, and budget.
Gross Pay − Deductions = Net Pay
Always build your personal budget using your Net Pay , not your Gross Pay!
Quick Check: Part 1
Let's check your understanding
1. Which number is always larger?
A. Gross Income
B. Net Income
2. Is health insurance mandatory?
A. Yes (Required by law)
B. No (Voluntary)
Recall that mandatory deductions are required by federal or state laws.
Quick Check: Part 2
Salary, PTO, & Tax Filing
3. If a salaried employee works 48 hours instead of 40, they will...
A. Get paid 1.5x overtime rate
B. Earn their same fixed salary
4. What is the main purpose of Form 1040?
A. To claim tax-free status forever
B. To file your annual tax return
Excellent job! You are ready to start planning your financial future.
Wage Warrior Worksheet Wage Warrior
Gross vs. Net Income (NYC Edition)
Name:
Date:
Part 1: The Gross Calculation
Gross Income = Hourly Rate × Hours Worked
1. Alex works at a local coffee shop in Soho, Manhattan earning $16.50 per hour. Last week, Alex worked 24 hours. Calculate the Gross Pay.
2. Jordan is an NYC Parks lifeguard at Rockaway Beach, Queens earning $19.00 per hour. During a busy hot week, Jordan worked 38 hours. Calculate the Gross Pay.
Part 2: The Net Reality
Net Pay = Gross Pay − Total Deductions
3. Casey lives and works in Brooklyn and has a Gross Pay of $840.00. The following standard NYC deductions are applied:
Federal Income Tax: $105.00
FICA Taxes: $64.26
NY State Income Tax: $32.00
NYC Resident Tax: $19.50
Health Insurance (Voluntary): $45.00
A) What is the total amount of deductions?
B) What is Casey's Net Pay (Actual Take-Home Pay)?
4. Taylor lives and works in the Bronx and earns $1,200 gross per paycheck. Taylor's total Mandatory Deductions (Federal, NYS, NYC, and FICA) are $240, and Voluntary Deductions (401k and NYC Transit MetroCard program) are $110. Calculate the Net Pay.
Part 3: Thinking Big
Explain why a New York City resident might have more deductions on their paycheck compared to someone living in a state with no state or local income taxes (like Texas or Florida). Is there any benefit to paying local municipal taxes?
Wage Warrior Answer Key Answer Key
Wage Warrior Worksheet (NYC Edition)
Teacher Resource
Part 1: The Gross Calculation
1. Alex: $16.50/hr × 24 hours (Soho, Manhattan)
Answer: $396.00
2. Jordan: $19.00/hr × 38 hours (Rockaway Beach, Queens)
Answer: $722.00
Part 2: The Net Reality
3. Casey: Gross $840.00 (Brooklyn)
A) Total Deductions:
$105 + $64.26 + $32 + $19.50 + $45 = $265.76
B) Net Pay:
$840.00 − $265.76 = $574.24
4. Taylor: Gross $1,200 (The Bronx)
Deductions: $240 (Mandatory) + $110 (Voluntary) = $350 total
Net Pay: $1,200 − $350 = $850.00
Part 3: Thinking Big
NYC Reflection Response Guide:
"New York City residents face an additional layer of income tax (NYC Resident Tax) because they live in a high-density municipality that funds local services directly. While people in Florida or Texas do not pay state or local income taxes, they may pay higher sales or property taxes, or receive fewer public benefits."
"Benefits of paying local municipal taxes in NYC include funding public services that residents rely on every day, such as the subway and bus systems (MTA), the NYC public school system, public libraries, free city parks (like Central Park and Prospect Park), and local sanitation, fire, and police departments."
Pay Stub Decode Slides Decoding the Stub
Cracking the Payroll Code
The Alphabet Soup
Payroll Acronyms
FICA
Federal Insurance Contributions Act (Social Security & Medicare taxes combined).
YTD
Year-To-Date (The running total of earnings or deductions accumulated since Jan 1st).
OASDI
Old-Age, Survivors, and Disability Insurance (The official name for Social Security tax).
FED WH
Federal Withholding (The portion of income tax sent to the federal government / IRS).
ST WH / STATE
State Withholding (The portion of income tax sent to your state's tax department).
MED WH
Medicare Withholding (Federal tax used to fund the Medicare healthcare program).
Current vs. YTD
Tracking Over Time
"Current" Column
Shows exactly what is being earned or deducted during this specific pay period (e.g., this two-week schedule).
"YTD" Column
The cumulative total of all pay and deductions from January 1st of the current year through today.
Why YTD Matters
Helps you verify that your annual retirement contributions (401k) are on track.
Required when applying for a car loan or apartment lease to prove total annual income.
Used to cross-reference your annual tax return (W-2) at the end of the year.
Anatomy of a Pay Stub
Three Essential Sections
1. Header Info
Contains employer details, employee's name and SSN, the specific pay period dates , and the actual paycheck date.
2. Earnings
Breaks down regular hours worked, pay rates, overtime rates, PTO hours paid, and the total **Gross Pay** for this period.
3. Deductions
Itemizes every tax withheld, benefit paid, retirement deferral, and concludes with the crucial **Net Pay** (your actual take-home).
Employer Paid Benefits
The "Free Money" Section
What are Employer Contributions?
Many pay stubs feature a section showing money your employer pays on your behalf for benefits.
💡 This does NOT reduce your paycheck! It is paid directly by the employer.
Common Examples:
Health Premium Subsidies : Employer pays a portion of your monthly insurance bill.
Pay Stub Scavenger Hunt Worksheet Stub Scavenger Hunt
Decoding Employee Earnings (NYC Resident)
Name:
BROOKLYN TECH HUB LLC
55 Water Street, Brooklyn, NY 11201
Pay Statement
Pay Date: 10/15/2025
EMPLOYEE: RILEY REYNOLDS
ID: #88291
PERIOD START: 10/01/2025
PERIOD END: 10/14/2025
Earnings Rate Hours Current YTD Regular Pay $22.00 80.00 $1,760.00 $33,440.00 Overtime $33.00 4.00 $132.00 $1,254.00 Gross Earnings $1,892.00 $34,694.00
Statutory Deductions Current YTD Federal Income Tax (FED WH) $185.42 $3,411.00 OASDI (Social Security) $117.30 $2,151.00 Medicare (MED WH) $27.43 $503.00 NY State Tax (NY ST WH) $88.50 $1,634.00 NYC Resident Tax (NYC WH) $56.76 $1,048.00 Net Pay (Take Home) $1,416.59 --
1. What is Riley's hourly rate of pay?
2. How many total hours did Riley work this period?
3. What is Riley's Gross Pay for this period?
4. How much has Riley earned total so far this year?
5. What does the acronym OASDI stand for?
6. Which tax takes the single most money out of Riley's check?
7. Why are there both "NY ST WH" and "NYC WH" tax lines?
8. What is the final Net Pay Riley receives?
Pay Stub Scavenger Hunt Answer Key Answer Key
Stub Scavenger Hunt (NYC Edition)
Teacher Resource
1. What is Riley's hourly rate of pay?
$22.00
2. How many total hours did Riley work this period?
84 hours (80 Regular + 4 Overtime)
3. What is Riley's Gross Pay for this period?
$1,892.00
4. How much has Riley earned total so far this year?
$34,694.00 (Gross YTD)
5. What does the acronym OASDI stand for?
Old-Age, Survivors, and Disability Insurance (Social Security)
6. Which tax takes the single most money out of Riley's check?
Federal Income Tax ($185.42)
7. Why are there both "NY ST WH" and "NYC WH" tax lines?
Riley is a resident of New York City, so they pay both NY State Income Tax (which funds state roads, state parks, and state police) and NYC Resident Income Tax (which funds municipal services like local MTA subways, the NYPD/FDNY, city schools, and city parks).
8. What is the final Net Pay Riley receives?
$1,416.59
W-4 Walkthrough Slides Day One Paperwork
Mastering the W-4 Form
The W-4 Purpose
Withholding Certificate
The W-4 Form tells your employer exactly how much Federal Income Tax to take out of your paycheck.
You complete this form on your very first day of a new job, or whenever your life status changes.
Balancing Withholdings
Too Little Tax Withheld?
Your paychecks are bigger, but you'll owe a tax bill in April.
Too Much Tax Withheld?
Your paychecks are smaller, but you'll receive a refund check.
W-4 vs. W-2: The Confusion
Don't Mix These Up!
Form W-4
"Day One"
• Filled out by you .
• Instructs the employer how to tax you.
• Happens at the **beginning** of employment.
Tells what WILL be taken out.
Form W-2
"Year End"
• Sent to you by your employer .
• Reports exactly how much you earned & paid.
• Arrives in **January** following the work year.
Reports what WAS taken out.
Step 1: Filing Status
Your Tax Identity
Single
Unmarried individuals who file taxes for just themselves.
Standard Bracket
Married Filing Jointly
Spouses who combine incomes and file on a single return.
Lower Overall Tax Rate
Head of Household
Unmarried with dependents (kids or relatives) and pays >50% of home costs.
Special Tax Breaks
Steps 2 & 3: Jobs & Dependents
Adjusting the Math
Multiple Jobs (Step 2)
If you work more than one job at a time, or file jointly with a working spouse:
• Your overall tax rate increases since your combined income is higher.
• Check the box to make sure enough tax is withheld!
Claiming Dependents (Step 3)
A **dependent** is someone you financially support (like a child or elderly relative).
• Reduces the amount of tax withheld from your check.
• Gives you larger paychecks during the year because you support others.
The "Exempt" Option
The Student Secret
What is "Exempt"?
W-4 Simulation Worksheet The New Hire Packet
W-4 & IT-2104 NYC Simulation Activity
Name:
Step 1: Choose Your NYC Persona
Read the following scenarios. Your teacher will assign you one, or you may choose. Circle your persona.
A. The Astoria Student
Riley is 16, lives in Astoria, Queens, and got their first job at a local pizza shop. They are single, live with family, and expect to earn $4,000 this year. They qualify as exempt from federal income tax withholding.
B. The Brooklyn Parent
Morgan lives in Park Slope, Brooklyn, is married, and has two children under 17. Morgan is the sole earner for the family and wants to claim both children as dependents on their tax forms.
C. The Harlem Multi-Tasker
Jordan lives in Harlem, is single, but works two part-time retail jobs. Jordan wants to prevent underwithholding by requesting an additional $15.00 in tax taken out of every paycheck.
Federal Form W-4 (Simulated)
Department of the Treasury - IRS
1
First & Last Name
Social Security Number
Filing Status
Single Married
3-4
Claim Dependents (Step 3) : Number of kids under 17 × $2,000 $ ________
Extra Withholding (Step 4c) : Enter any extra amount you want withheld per check $ ________
Claim Exempt : Write "EXEMPT" if you qualify (had $0 tax liability last year and expect <$15,000 this year) ____________
New York State & City Form IT-2104 (Simulated)
NYS Dept of Taxation and Finance
New York State and City taxes require their own withholding certificate. Complete the fields below:
IT
NYC Resident Box : Are you a resident of New York City? (Checking Yes applies NYC local tax)
Yes No
NYS Allowances (Line 1) : Enter number of allowances claimed (e.g. 1 for yourself, plus 1 for each child) ______
NYC Allowances (Line 2) : Enter number of NYC local allowances (usually matching line 1 if NYC resident) ______
NYS / NYC Extra Withholding (Line 3) : Enter any additional local amount to withhold per paycheck $ ________
Reflect: Why does New York require a separate form (IT-2104) rather than just using the federal W-4? What does indicating you are an "NYC Resident" change? FICA Deep Dive Slides FICA Explained
Social Security & Medicare Deep Dive
Who is FICA?
Federal Legislation
FICA stands for the Federal Insurance Contributions Act.
It is a mandatory federal payroll tax that requires every working citizen to contribute a percentage of their earnings to fund two critical social programs.
Established in 1935, FICA helps ensure long-term societal stability.
The Two Pillars of FICA
How Your Money is Split
6.2%
1. Social Security
Provides a steady retirement income for senior citizens, individuals with permanent disabilities, and surviving dependents of deceased workers.
Retirement & Disability Safety Net
1.45%
2. Medicare
Provides federal health insurance, shielding elderly individuals (65+) and younger individuals with specific medical conditions from catastrophic medical debt.
Public Health Support
FICA Math Walkthrough
Doing the Calculation
Say your gross paycheck is $1,000.00.
How much is deducted for FICA?
Social Security Tax:
$1,000.00 × 0.062 = $62.00
Medicare Tax:
$1,000.00 × 0.0145 = $14.50
Total FICA Deductions
$62.00 + $14.50
$76.50
In total, exactly 7.65% of your gross income goes directly to FICA!
The Employer Match
Hidden Overhead
You Are Not Alone!
For every dollar deducted from your paycheck for FICA taxes, **your employer must pay the exact same amount** out of their own pocket to match it.
💡 This means the total FICA contribution sent to the government is actually 15.3% of your earnings!
Matching Breakdown
Your Portion
7.65%
Company Portion
7.65%
Total FICA Received by Government:
15.3%
Limits & Caps
Advanced Tax Laws
SS Wage Base Cap
Social Security taxes have a **maximum wage limit** (cap) each year.
• For example, once an employee earns above $176,100, they pay **0%** Social Security on additional income.
Social Security Maximum Cap
Unlimited Medicare
Unlike Social Security, there is **no maximum wage limit** for Medicare tax.
FICA Math Worksheet FICA Math
Funding the Safety Net (NYC Edition)
Name:
Social Security
6.2%
(0.062)
Medicare
1.45%
(0.0145)
Total FICA
7.65%
(0.0765)
1. The Entry Level Check
Sam earns $400.00 gross per week working part-time at Broadway Bagels in Manhattan . Calculate Sam's FICA contributions.
Social Security (6.2%):
\( 400 \times 0.062 = \)
Medicare (1.45%):
\( 400 \times 0.0145 = \)
2. The Professional Salary
Casey's bi-weekly gross pay is $2,850.00 working as a paralegal at a law firm in Brooklyn Heights . Calculate the total FICA deduction.
3. Working in Reverse
If an NYC transit employee's Social Security deduction was $31.00 exactly on their weekly check, what was their total Gross Pay? (Hint: Divide by 0.062)
Reflect & Discuss
Some people argue that FICA taxes are unfair because young workers might not see the benefits for 50 years. Others argue they are the foundation of a stable society. Based on what you've learned about the two programs (Retirement and Healthcare), do you think these taxes are a good investment for your future? Why or why not?
Paycheck Audit Slides The Payroll Audit
Self-Advocacy in Finance
Why Check Your Stub?
Payroll Discrepancies
Even the best companies make mistakes. Software glitches, administrative typos, or outdated tax tables can all lead to underpaid earnings .
Crucial Fact
"It is your legal and financial responsibility to verify your earnings. If you don't catch errors, nobody else will."
Errors Occur In:
Incorrect hours reported (missing timecards).
Wrong withholding tax rates applied.
Deductions for canceled benefits (like health).
The Auditor's Checklist
The Standard Formulas
1
Verify Gross Pay : Does it equal your Hourly Rate × Hours Worked ?
2
Verify Social Security : Is it exactly 6.2% of Gross Pay ?
3
Verify Medicare : Is it exactly 1.45% of Gross Pay ?
4
Verify Net Pay : Does Gross Pay − All Deductions = Net Pay ?
Overtime Auditing
Doing the Calculation
The Overtime Rule
Hourly workers are entitled to **1.5 times** their regular rate for any hours worked above **40 hours per week**.
Let's calculate:
Hourly rate of $16.00 / hour . Worked 44 hours total.
Step-by-Step Math
Regular Hours (First 40):
40 hours × $16 = $640.00
Overtime Rate:
$16 × 1.5 = $24.00 / hour
Overtime Hours (44 - 40 = 4):
4 hours × $24 = $96.00
Actual Gross Pay:
$640 + $96 = $736.00
Common Sneaky Errors
What to Look For
Double Deductions
Verify that retirement plan contributions or health insurance benefits are not subtracted **twice** under different names.
Incorrect Filing Status
Ensure your employer applied your current filing status (e.g. Single) as specified on your W-4 form.
Other Mistakes:
YTD Math Glitches : The current month's deductions aren't correctly adding to the YTD totals.Outdated Tax Rates : Employers might use tax charts from several years ago instead of current year updates.
Paycheck Audit Worksheet The Audit Challenge
Case: Jamie Justice vs. Brooklyn Brews
Auditor Name:
Timecard: Jamie Justice
Monday (Williamsburg): 8.0 hrs
Tuesday (Williamsburg): 8.5 hrs
Wednesday (Williamsburg): 8.5 hrs
Thursday (Williamsburg): 9.0 hrs
Friday (Williamsburg): 8.0 hrs
TOTAL HOURS: 42.0 hrs
Contract Details : Pay Rate: $20.00/hour. Jamie signed an onboarding agreement to receive flat hourly rate compensation (no overtime premium this schedule per training period terms).
GLITCHY STUB
Jamie's Pay Stub
Earnings
Regular (40 hrs @ $20) $800.00
GROSS PAY: $800.00
Statutory Withholdings
FED WH: $96.00
NY ST WH: $34.00
NYC Local WH: $21.00
FICA (SS): $64.00
FICA (Med): $11.60
TOTAL DEDUCTIONS: $226.60
NET PAY: $565.40
Auditor's Findings
1. Error in Gross Pay:
Compare the timecard hours to the pay stub hours. What is wrong with the gross calculation?
2. Error in FICA Calculations:
Recalculate Social Security (6.2%) and Medicare (1.45%) using the Correct Gross Pay. Which deduction on the stub is mathematically incorrect?
3. The Final Net Total & Stub Math Error:
Show the final correct calculation: Correct Gross − All Correct Deductions = Correct Net Pay. (Note: Stub's printed Net Pay does not even match Gross minus Deductions!).
Paycheck Audit Answer Key Audit Answer Key
Case: Jamie Justice (NYC Edition)
Teacher Resource
1. Gross Pay Error
The timecard shows 42 hours worked at Brooklyn Brews, but the pay stub only listed and calculated 40 hours. Jamie was underpaid by 2 hours.
Correct Gross Pay: 42 hrs × $20.00 = $840.00
2. FICA Calculation Errors
Social Security (FICA) on the stub was listed as $64.00, which is incorrect (calculated at 8% of $800 instead of 6.2%). Medicare was calculated on the wrong gross amount ($800 instead of $840).
Correct SS (6.2%)
$840 × 0.062 = $52.08
Correct Med (1.45%)
$840 × 0.0145 = $12.18
3. Final Audit Results & Net Pay Math Error
The pay stub lists a printed Net Pay of $565.40 . However, Gross ($800) minus the listed Deductions ($226.60) should equal $573.40 . This represents a flat $8.00 addition error on the face of the stub.
<table class="w-full text-left font-mono text-sm mb-4"><tbody><tr class="border-b"><td class="py-2">Correct Gross Pay</td><td class="py-2 text-right text-emerald-600 font-bold">$840.00</td></tr><tr class="border-b italic text-slate-400"><td class="py-2">Federal Income Tax (FED WH - Unchanged)</td><td class="py-2 text-right">($96.00)</td></tr><tr class="border-b italic text-slate-400"><td class="py-2">NY State Income Tax (NY ST WH - Unchanged)</td><td class="py-2 text-right">($34.00)</td></tr><tr class="border-b italic text-slate-400"><td class="py-2">NYC Resident Income Tax (NYC WH - Unchanged)</td><td class="py-2 text-right">($21.00)</td></tr><tr class="border-b text-emerald-600"><td class="py-2">Correct Social Security (FICA)</td><td class="py-2 text-right">($52.08)</td></tr><tr class="border-b text-emerald-600"><td class="py-2">Correct Medicare (FICA)</td><td class="py-2 text-right">($12.18)</td></tr><tr class="font-bold text-lg bg-slate-900 text-white"><td class="p-3">CORRECT NET PAY</td><td class="p-3 text-right text-emerald-400 font-mono">$624.74</td></tr></tbody></table>
Difference from printed stub: Jamie was underpaid by $59.34 ($624.74 - $565.40).
