To compute the tax using the percentage method, follow the steps illustrated below. Step 1 Determine the amount of gross wages earned, marital status, number of allowances, and frequency of pay. Note: If the wage ends in a fractional dollar amount, the wage may be rounded to the nearest dollar. However, in this text, exact wages are used. ➡ Wilson Goodman, single, claims two allowances and earns $915.60 semimonthly. Step 2 Multiply the number of allowances claimed by the amount of one allowance for the appropriate payroll period, as shown in the Table of Allowance Values in Figure 4.6. ➡ Table of Allowance Values for semimonthly payroll period shows $175.00. Multiply $175.00 × 2 = $350.00 Step 3 Subtract the amount for the number of allowances claimed from the employee’s gross pay to find the excess of wages over allowances claimed. ➡ Gross pay $915.60 Less: Allowances 350.00 Excess wages $565.60 Step 4 Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table. ➡ Compute tax from Tax Table 3(a), page T-3. ($565.60 – $563.00 = $2.60 × 12% = $0.31 + $40.50) = $40.81 Example 4-3 To use the wage-bracket method, follow the steps illustrated below. Step 1 Select the withholding table that applies to the employee's marital status and pay period. ➡ Adrienne Huff is married and claims 3 allowances. She is paid weekly at a rate of $815. Step 2 Locate the wage bracket (the first two columns of the table) in which the employee's gross wages fall. ➡ Locate the appropriate wage bracket (see Figure 4.7): At least $810 but less than $821 Step 3 Follow the line for the wage bracket across to the right to the column showing the appropriate number of allowances. Withhold this amount of tax. ➡ Move across the line to the column showing 3 allowances. The tax to withhold is $35. Use (a) the percentage method and (b) the wage-bracket method to compute the federal income taxes to withhold from the wages or salaries of each employee. Enter all amounts as positive numbers. Round your calculations and final answers to the nearest cent. Click here to access the Table of Allowance Values. Click here to access the Percentage Method Tables. Click here to access the Wage-Bracket Method Tables. Amount to Be Withheld Employee Marital Status No. of Withholding Allowances Gross Wage or Salary Percentage Method Wage-Bracket Method Corn, A. M 2 $675 weekly $fill in the blank 1 $fill in the blank 2 Fogge, P. M 9 1,960 weekly fill in the blank 3 Must use percentage method Felps, S. M 0 1,775 biweekly fill in the blank 5 fill in the blank 6 Carson, W. M 7 2,580 semimonthly fill in the blank 7 fill in the blank 8 Helm, M. M 4 5,380 monthly fill in the blank 9

To compute the tax using the percentage method, follow the steps illustrated below. Step 1 Determine the amount of gross wages earned, marital status, number of allowances, and frequency of pay. Note: If the wage ends in a fractional dollar amount, the wage may be rounded to the nearest dollar. However, in this text, exact wages are used. ➡ Wilson Goodman, single, claims two allowances and earns $915.60 semimonthly. Step 2 Multiply the number of allowances claimed by the amount of one allowance for the appropriate payroll period, as shown in the Table of Allowance Values in Figure 4.6. ➡ Table of Allowance Values for semimonthly payroll period shows $175.00. Multiply $175.00 × 2 = $350.00 Step 3 Subtract the amount for the number of allowances claimed from the employee’s gross pay to find the excess of wages over allowances claimed. ➡ Gross pay $915.60 Less: Allowances 350.00 Excess wages $565.60 Step 4 Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table. ➡ Compute tax from Tax Table 3(a), page T-3. ($565.60 – $563.00 = $2.60 × 12% = $0.31 + $40.50) = $40.81 Example 4-3 To use the wage-bracket method, follow the steps illustrated below. Step 1 Select the withholding table that applies to the employee's marital status and pay period. ➡ Adrienne Huff is married and claims 3 allowances. She is paid weekly at a rate of $815. Step 2 Locate the wage bracket (the first two columns of the table) in which the employee's gross wages fall. ➡ Locate the appropriate wage bracket (see Figure 4.7): At least $810 but less than $821 Step 3 Follow the line for the wage bracket across to the right to the column showing the appropriate number of allowances. Withhold this amount of tax. ➡ Move across the line to the column showing 3 allowances. The tax to withhold is $35. Use (a) the percentage method and (b) the wage-bracket method to compute the federal income taxes to withhold from the wages or salaries of each employee. Enter all amounts as positive numbers. Round your calculations and final answers to the nearest cent. Click here to access the Table of Allowance Values. Click here to access the Percentage Method Tables. Click here to access the Wage-Bracket Method Tables. Amount to Be Withheld Employee Marital Status No. of Withholding Allowances Gross Wage or Salary Percentage Method Wage-Bracket Method Corn, A. M 2 $675 weekly $fill in the blank 1 $fill in the blank 2 Fogge, P. M 9 1,960 weekly fill in the blank 3 Must use percentage method Felps, S. M 0 1,775 biweekly fill in the blank 5 fill in the blank 6 Carson, W. M 7 2,580 semimonthly fill in the blank 7 fill in the blank 8 Helm, M. M 4 5,380 monthly fill in the blank 9

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter3: Computing The Tax

Section: Chapter Questions

Problem 18CE

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Example 4-2

To compute the tax using the percentage method, follow the steps illustrated below.

Step 1

Determine the amount of gross wages earned, marital status, number of allowances, and frequency of pay. Note: If the wage ends in a fractional dollar amount, the wage may be rounded to the nearest dollar. However, in this text, exact wages are used.

➡

Wilson Goodman, single, claims two allowances and earns $915.60 semimonthly.

Step 2

Multiply the number of allowances claimed by the amount of one allowance for the appropriate payroll period, as shown in the Table of Allowance Values in Figure 4.6.

➡

Table of Allowance Values for semimonthly payroll period shows $175.00.

Multiply $175.00 × 2 = $350.00

Step 3

Subtract the amount for the number of allowances claimed from the employee’s gross pay to find the excess of wages over allowances claimed.

➡

Gross pay	$915.60
Less: Allowances	350.00
Excess wages	$565.60

Step 4

Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table.

➡

Compute tax from Tax Table 3(a), page T-3.

($565.60 – $563.00 = $2.60 × 12% = $0.31 + $40.50) = $40.81

Example 4-3

To use the wage-bracket method, follow the steps illustrated below.

Step 1
Select the withholding table that applies to the employee's marital status and pay period.	➡	Adrienne Huff is married and claims 3 allowances. She is paid weekly at a rate of $815.
Step 2
Locate the wage bracket (the first two columns of the table) in which the employee's gross wages fall.	➡	Locate the appropriate wage bracket (see Figure 4.7):
		At least $810 but less than $821
Step 3
Follow the line for the wage bracket across to the right to the column showing the appropriate number of allowances. Withhold this amount of tax.	➡	Move across the line to the column showing 3 allowances.
		The tax to withhold is $35.

Use (a) the percentage method and (b) the wage-bracket method to compute the federal income taxes to withhold from the wages or salaries of each employee. Enter all amounts as positive numbers. Round your calculations and final answers to the nearest cent.

Click here to access the Table of Allowance Values.

Click here to access the Percentage Method Tables.

Click here to access the Wage-Bracket Method Tables.

				Amount to Be Withheld
Employee	Marital Status	No. of Withholding Allowances	Gross Wage or Salary	Percentage Method	Wage-Bracket Method
Corn, A.	M	2	$675 weekly	$fill in the blank 1	$fill in the blank 2
Fogge, P.	M	9	1,960 weekly	fill in the blank 3	Must use percentage method
Felps, S.	M	0	1,775 biweekly	fill in the blank 5	fill in the blank 6
Carson, W.	M	7	2,580 semimonthly	fill in the blank 7	fill in the blank 8
Helm, M.	M	4	5,380 monthly	fill in the blank 9

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