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Student name:_____________________________________Date:_______________
MODULE 31
Describe the withholding laws and benefits provided by social security, workers' compensation and unemployment compensation.
Objectives:
A. Define tax withholding and list at least three (3) kinds of taxable income.
B. List other types of withholding taxes.
C. Describe benefits provided by Social Security, Unemployment
Compensation, and Workers' Compensation.
MODULE 31: INFORMATION SHEET
TO THE STUDENT: Read
and study this information sheet and then complete the student activities at
the end of this module.
What is income tax
withholding?
The
federal and state governments and local government agencies can generate taxes
for their operation and for providing various services. One such tax is an
income tax. The income tax is a "pay as you go" tax. You must pay the
tax as you earn or receive income. Federal Income Tax is withheld from the
salaries or wages of most employees. This includes bonuses, commissions, and
vacation allowances in addition to your regular pay. Tips are also taxable. The
tips you receive and report to your employer are included with your regular
wages to determine the amount that is withheld. In some cases, taxes are
withheld on fringe benefits paid to you. In addition, income tax is withheld
from sick pay you receive from your employer or an agent of your employer as it
is from your salaries and wages. Generally, income tax will be withheld from
pensions and annuities. Income tax is also withheld from certain kinds of
gambling winnings.
The
amount of federal income tax actually withheld from your paycheck will be
determined by current tax rates, the amount you earn, and the information you
give your employer when you fill out the form popularly called the
"W-4," but titled "Employee's Withholding Allowance
Certificate." The W-4 form includes four types of information your
employer will use to figure your withholding (see page 7):
1. Whether
to withhold at the single person's tax rate or the married person's tax rate.
2. How many
withholding allowances you claim.
3. Whether you want to have an additional amount withheld.
4. Whether or not you are exempt from paying federal
income taxes.
If
your income is low enough that you will not have to pay income tax for the
year, you may be exempt from withholding. If you are exempt, your employer will
not withhold Federal Income Tax from your wages. An exemption is good for only
one year. You must file a new W-4 by February 15 each year to continue your
exemption.
There
is also a criminal penalty for willfully falsifying information or failing to
supply information that would increase the amount withheld. A simple error or
an honest mistake will not result in a penalty.
The
amount of tax actually paid to the Federal Government for any given year will
be determined when and if you file the appropriate federal tax form (Form
1040). Forms must be filed by April 15 following the taxable period of January
1 to December 31 of the prior year. It is very important to have the correct
amount of tax withheld from your weekly paycheck. If, after you file your
federal tax forms, you owe the federal government more than has been withheld
for the year, you may have to pay a penalty, and a new W-4 should be completed
with your employer to increase your withholding.
Many
state governments and local government agencies collect an income tax through
withholding. All income taxes are based on gross wages before deductions.
Social Security Tax Withholding and Benefits
To
pay for the Federal Social Security System, you and your employer will be taxed
a percentage of your covered earnings. Covered earnings and the rate of tax may
change from year to year to keep up with the financial needs of the Social
Security Fund. The Social Security Tax is another "pay as you go"
system. Each pay check is or will be taxed at the employee rate to determine
the amount of withholding.
What
is Social Security? It is a Federal Government program for you and your family
when you retire, become severely disabled, or die. It protects you and your
family while you work and after you retire. It is a base to build on, with
other insurance, investments, private pensions and personal savings.
Most
workers begin receiving full retirement benefits at age 65 or reduced retirement
benefits as early as age 62. (Starting in the year 2000 for people born in 1938
or later, this age will increase gradually. By 2027, full-retirement age will
be 67 for people born after 1959.) Your benefits may be higher if you delay
retiring until after full-retirement age.
The
Social Security law has a special formula for figuring benefits. The formula
uses your average earnings over your entire working life. For most retirement
benefit estimates, your 35 best years of earnings will be averaged. If you
become disabled or die before retirement, fewer years may be used to figure
those benefits. For retirement estimates, it is assumed that you will continue
working up to retirement age.
Disability
benefits are paid if you become totally disabled before you reach
full-retirement age. To get disability benefits, three things are necessary:
·
You need a certain
number of work credits, and they had to be earned during a specific period of
time (you get one credit for each $700 of your covered annual earnings, up to a
maximum of 4 credits for the year, no matter when you work during the year);
·
You must have a
physical or mental condition that has lasted, or is expected to last, at least
12 months or to end in your death; and
·
Your disability must
be severe enough to keep you from doing any substantial work, not just your
last job.
As
you work you also build up protection for your family. Benefits may be payable
to:
·
Your unmarried
children under age 18 (under age 19 if in high school) or 18 and older if disabled
before age 22;
·
Your spouse who is
age 62 or older or who is any age and caring for your qualified child who is
under age 16 or disabled; and
·
Your divorced spouse
who was married to you for at least 10 years and who is age 62 or older and
unmarried.
If
you die, your unmarried young or disabled children may qualify for monthly
payments. Your widow or widower, even if divorced, may also qualify for
payments starting:
·
At age 60 or at age
50 if disabled (if divorced, your marriage must have lasted 10 years); or
·
At any age if caring
for your qualified child who is under age 16 or disabled.
Even
if you are still working, you may qualify for benefits. Until you reach age 70,
there are limits on how much you can earn without losing some or all of your
Social Security retirement benefits. These limits change every year. When you
apply for benefits, you will be told what the limits are at that time and if
work would affect your monthly checks and those of your qualified family
members.
Social
Security taxes withheld also pay part of Medicare benefits. Medicare is a basic
health insurance program for people 65 or older. You are also eligible for
Medicare if you have been receiving disability benefits for two years or have
permanent kidney failure. There are two parts to Medicare: Hospital Insurance
and Medical Insurance. Your Social Security Tax pays for Hospital Insurance
coverage but Medical Insurance coverage is optional and requires an additional
premium paid by you out of your pocket. Neither plan pays all expenses nor are
all services covered. Additional personal insurance coverage is recommended.
Unemployment Compensation Benefits
Unemployment
Compensation (U.C.) is a form of job insurance. If you lose your job through no
fault of your own, it protects you against total loss of income for a specific
period of time. Unemployment compensation benefits are paid for by Federal and
state taxes on employers, and if certain economic conditions exist, in
Pennsylvania, by employees.
To qualify for benefits, the applicant
must:
1. Have
worked for an employer covered by the U.C. Law.
2. Meet
certain wage and weeks of employment requirements. A high school student's
employment in a Cooperative Education Program is NOT covered employment and
will not qualify the student for U.C. benefits.
3. Be
unemployed through no fault of your own.
4. Be able
to work and be available for work.
You may
be denied benefits if you:
1. Quit
your job without a valid reason.
2. Were
discharged for willful misconduct.
3. Are
unemployed because you were involved in a strike.
4. Are
unable or unavailable to work.
5. Refuse
to accept any suitable work within a reasonable distance of your home.
6. Refuse
to accept an offer to suitable full-time work in order to pursue seasonal or
part-time employment.
7. Are
receiving U.C. from another state or from the federal government.
If
unemployed, you may file a claim for benefits at the local office of Employment
Security. If there is no reason for disqualification, payment is authorized.
The general aim is to pay the unemployed 45 to 50% of his/her regular weekly
earnings up to a maximum allowed by state law.
The
maximum weekly benefit is determined by the highest amount earned in any one of
the first four quarters of the "base year". "Base year" is
established as the first four of the last five completed calendar quarters
prior to the date on which application is made for benefits. In addition, each
claimant can receive additional money for each dependent to the maximum allowed
by law.
The
duration of payments can extend up to 26 weeks of total unemployment during the
52-week period beginning with the date of application for benefits. A federal
program could extend U.C. benefits for another 9 or 13 weeks in some cases. In
addition, a small amount of money can be earned without losing any benefit
depending on the amount of unemployment compensation. Consult your local
employment service office. All U.C. benefits received must be reported on your
Federal Income Tax Return. These benefits may be taxable depending on your
adjusted gross income for the tax year.
Pennsylvania Workers' Compensation Law
To
participate in a cooperative education program, your employer is required to
maintain workers’ compensation coverage (either by being approved to
self-insure and hiring a third party administrator to handle its claims or by
purchasing a workers’ compensation policy through an insurance company). The
coverage will pay wage loss benefits and reasonable and necessary medical bills
should you be injured on-the-job or develop a work-related disease unless your
employer can prove the injury was intentionally self-inflicted or caused by
your violation of law.
An
injured employee will generally receive 2/3 of the employee’s average weekly
wage as a wage loss benefit for the duration of any work-related disability—up
to but not more than 66 2/3 percent of the current statewide average weekly
wage. Wage loss benefits begin with the 7th day of disability unless
the disability lasts 14 days or more—in which case benefits are paid from day
one. If the calculated benefit is less than 50% of the statewide average weekly
wage, then the benefit payable is the lesser of 50% of the statewide average
weekly wage or 90% of the injured worker’s average weekly wage. When an injury
results in a permanent loss such as the loss of/loss of use of appendages,
hearing or sight, the number of wage loss benefit weeks is specified by state
law.
In
the case of a work-related injury or disease resulting in death, dependent
beneficiaries may be entitled to wage loss benefits as the result of the death
and reasonable costs of burial not exceeding $3000 may also be covered.
If
a minor to which child labor laws apply suffers a work-related injury or
disease while being permitted to work in violation of any provision of child
labor laws, the minor may seek 150% of the wage loss benefits that normally
would have been due him or her, with the additional 50% payment being the
responsibility of the employer rather than its insurer.
Report
any work-related injuries or illnesses to your supervisor/ employer at once.
Your employer is required to report all injuries to its insurance carrier and
to file an Employer’s Report of Occupational Injury or Disease with the state
if you become entitled to wage loss benefits as the result of a work-related
injury or disease.
Resources
For
more information about taxes, Social Security withholding, etc.
For
more information about Unemployment and Workers’ Compensation:
www.dli.state.pa.us/landi/site/default.asp
MODULE 31: STUDENT
ACTIVITIES
TO THE STUDENT: After
reading and studying the information sheet, answer the following questions.
1.
Define tax withholding:
2. List three kinds
of income that can be taxed:
a.
b.
c.
3. List three
withholding taxes:
a.
b.
c.
4. Although the
"W4" may change periodically, the "W4" provided on page 7
is a good example of what you will be required to fill out to determine your
withholding tax. Read the directions and complete the certificate.
5. List three
benefits available through the Social Security Program:
a.
b.
c.
6. In a complete
paragraph, describe Unemployment Compensation benefits and three qualifications
for applying for them.
7. In a complete
paragraph describe Workers' Compensation benefits.
8. True or
False If an injury is intentionally self-inflicted, you can collect
damages
from your employer.
MODULE 31: STANDARDS
ADDRESSED IN THIS MODULE
Pennsylvania’s Academic Standards for
Career Education and Work
13.2.11. Career Acquisition (Getting a Job)
D.
Identify sources of health, safety and regulatory practices
and their effect on the work environment.
·
Child Labor Laws
·
Employee Right to Know
·
Fair Labor Standards Act
·
Hazardous occupations
·
Material Safety Data Sheets (MSDS) information
·
Occupational Safety and Health Administration (OSHA)
regulations
·
Student work permits
Pennsylvania’s
Academic Standards for Reading, Writing, Speaking and Listening (RWSL)
1.1.11. Learning to Read Independently
E.
Establish
a reading vocabulary by identifying and correctly using new words acquired
through the study of their relationships to other words. Use a dictionary
or related reference.
1.5.11. Quality of Writing
F. Edit writing using the conventions of
language.
·
Spell
all words correctly.
·
Use
capital letters correctly.
·
Punctuate
correctly (periods, exclamation points, question marks, commas, quotation
marks, apostrophes, colons, semicolons, parentheses, hyphens, brackets,
ellipses).
·
Use
nouns, pronouns, verbs, adjectives, adverbs, conjunctions, prepositions and
interjections properly.
·
Use
complete sentences (simple, compound, complex, declarative, interrogative,
exclamatory and imperative).
| ©
2003. The Professional Personnel Development Center , Penn State University. |
| To return to the Table of Contents click here. To print copies of the CAPS materials click here. |