6.2 - Net Pay Practice

Front

What is net pay?

Back

Net pay is the amount of money an employee takes home after all deductions, such as taxes and benefits, have been subtracted from their gross pay.

Front

How do you calculate net pay?

Back

Net pay = Gross pay - Total deductions.

Front

What are deductions?

Back

Deductions are amounts withheld from an employee's gross pay for taxes, insurance, retirement contributions, and other benefits.

Front

What is FICA?

Back

FICA stands for the Federal Insurance Contributions Act, which includes Social Security and Medicare taxes.

Front

What is the Social Security tax rate?

Back

The Social Security tax rate is 6.2% of gross pay.

Front

What is the Medicare tax rate?

Back

The Medicare tax rate is 1.45% of gross pay.

Front

If an employee earns $500, how much is withheld for Social Security tax?

Back

Social Security tax withheld = $500 * 6.2% = $31.

Front

If an employee earns $500, how much is withheld for Medicare tax?

Back

Medicare tax withheld = $500 * 1.45% = $7.25.

Front

What is gross pay?

Back

Gross pay is the total amount of money earned by an employee before any deductions are made.

Front

What types of taxes are typically withheld from an employee's pay?

Back

Federal income tax, Social Security tax, and Medicare tax are typically withheld.