2.1 Notes.notebook
September 02, 2014
2.1 Federal Income Tax
Gross Income vs
Net Income
Federal Income Tax: The law requires employers to withhold a certain amount of your pay for federal income tax (FIT). The Internal Revenue Service (IRS) provides employers with tables that show how much money to withhold. The amount withheld depends on: 1.)
2.)
3.)
Withholding allowances (also called exemptions): 1
2.1 Notes.notebook
September 02, 2014
Carla Good is an actuary. Her gross pay for this week is $425.88. She is married and claims 2 allowances for herself and her husband. What amount will Carla's employer withhold from her pay for FIT?
Find federal income tax withheld each week using the Weekly Payroll tables. 1. Dan Cane, a welder, is married, claims 1 allowance and earns $390.50.
2. Angie Kim, an executive assistant, is single, claims 2 allowances, and earns $435.95
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2.1 Notes.notebook
September 02, 2014
Percentage Method:
Some companies use a percentage method instead of the tax tables to compute the income tax withheld. With the percentage method, you use taxable wages to find the withholding amount. Taxable wages depend on the number of allowances you claim. Use the table to find the amount withheld for a single employee paid weekly. Each weekly allowance is $63.46
Weekly Taxable Wages
The amount of income tax withhold is
Each Weekly allowance is $63.46
Over
But Not Over
$51.00
$195.00
0% plus (10% of excess over $51.00)
$195.00
$645.00
$14.40 plus (15% of excess over $195.00)
$645.00
$1482.00
$81.90 plus (25% over excess of $645.00)
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2.1 Notes.notebook
September 02, 2014
Lance Hart's gross pay for the week is $393.23. He is a carpenter's apprentice, is single, and claims 2 allowances. Using the percentage method of withholding, what amount will Lance's employer withhold from his pay for federal income tax?
Use the percentage method of withholding to find the amount of federal income tax withheld each week:
1. Deb Boon is single, claims 2 allowances and earns $293.23.
2. Mitch Watt is single, claims 4 allowances, and earns $587.94.
.
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2.1 Notes.notebook
September 02, 2014
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