Question

Assume a tax rate of 6.2% on $128,400 for Social Security and 1.45% for Medicare. No one will reach the maximum for FICA. Complete the following payroll register. (Use the percentage method to calculate FIT for this weekly period
Marital status - m
Allowance claimed – 4
Gross pay - $,2800
FIT
Social Security
Medicare
Net pay

Answer 1

Answer:

• FIT: $340.76 (see comment)
• OASDI: $173.60
• Medicare: $40.60
• Net Pay: $2245.04

Step-by-step explanation:

In addition to the information given in the problem statement, we need to know the applicable tax rates and allowance deductions. If we assume the tables we found (attachments 1 and 2) are the same as those in your text, the one additional fact needed is the gross pay to date. At the given wage rate, paychecks after the 44th week will have reduced FICA tax deductions.

Allowances: 4 × $79.80 = $319.20

Adjusted gross pay for FIT: $2800 -319.20 ≈ $2481 (rounded to nearest $)*

FIT: 0.22 × (2481 -1711) +171.36 = 0.22×2481 -205.06 = 340.76

Social Security & Medicare: 0.0765 × 2800 = 214.20

Net pay = $2800 -340.76 -214.20 = $2245.04

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* Comment on rounding

The IRS gives the option of rounding the pay or the tax, as long as it is consistently done. Here, the amount of tax on the unrounded gross pay would be 4 cents less: 340.72. The option of reducing the last digit of pay to zero is also offered. FIT on 2480 would be 340.54.