Problem 25
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.
Employee
Taylor, L.
Butkus, D.
Lewis, R.
Lambert, J.
Singletary, M.
No. of
Marital Withholding
Status Allowances
S
S
M
M
M
2
1
6
4
9
Gross Wage
or Salary
$674.99
$1,960.49
$1,774.51
$2,480.47
$5,380.00
weekly
weekly
biweekly
semimonthly
monthly
Amount to Be
Withheld
WagePercentage Bracket
Method
Method
$ 68.29
416.24
81.23
211.60
286.15
$ 68.00
416.24*
81.00
213.00
286.00
* Must use percentage method.
Percentage method calculations:
Taylor:
1. Round gross wages to the nearest dollar: $675
2. Determine the total personal allowances per pay period (in this case, 2). Look at
the number on page T-2 of handout and multiply it by the number of allowances
($61.54 x 2 = $123.08). Note: this amount is not taxable.
3. Subtract the nontaxable amount from the previous step from the employee’s gross
pay to find the taxable amount (also called “excess of wages over allowances
claimed”) $675 – $123.08 = $551.92
4. Determine the withholding tax on the excess of wages over allowances claimed
by referring to the appropriate Percentage Method Withholding Table on page T-3
of handout : $13.70 + (15% x [$551.92 - $188])
=$13.70 + (15% x $363.92)
=$13.70 + $54.488
=$68.29
Butkus:
1. Round gross wages to the nearest dollar: $1,960
2. Determine the total personal allowances per pay period (in this case, 1). Look at
the number on page T-2 of handout and multiply it by the number of allowances
($61.54 x 1 = $61.54). Note: this amount is not taxable.
3. Subtract the nontaxable amount from the previous step from the employee’s gross
pay to find the taxable amount (also called “excess of wages over allowances
claimed”) $1,960 – $61.54 = $1,898.46
4. Determine the withholding tax on the excess of wages over allowances claimed
by referring to the appropriate Percentage Method Withholding Table on page T-3
of handout : $260.15 + (28% x [$1,898.46 - $1,341])
=$260.15 + (28% x $557.46)
=$260.15 + $156.0888
=$416.24
Lewis:
1. Round gross wages to the nearest dollar: $1,775
2. Determine the total personal allowances per pay period (in this case, 6). Look at
the number on page T-2 of handout and multiply it by the number of allowances
($123.08 x 6 = $738.48). Note: this amount is not taxable.
3. Subtract the nontaxable amount from the previous step from the employee’s gross
pay to find the taxable amount (also called “excess of wages over allowances
claimed”) $1,775 – $738.48 = $1,036.52
4. Determine the withholding tax on the excess of wages over allowances claimed
by referring to the appropriate Percentage Method Withholding Table on page T-3
of handout : $56.10 + (15% x [$1,036.52 - $869])
=$56.10 + (15% x $167.52)
=$56.10 + $25.128
=$81.23
Lambert:
1. Round gross wages to the nearest dollar: $2,480
2. Determine the total personal allowances per pay period (in this case, 4). Look at
the number on page T-2 of handout and multiply it by the number of allowances
($133.33 x 4 = $533.32). Note: this amount is not taxable.
3. Subtract the nontaxable amount from the previous step from the employee’s gross
pay to find the taxable amount (also called “excess of wages over allowances
claimed”) $2,480 – $533.32 = $1,946.68
4. Determine the withholding tax on the excess of wages over allowances claimed
by referring to the appropriate Percentage Method Withholding Table on page T-3
of handout : $60.90 + (15% x [$1,946.68 - $942])
=$60.90 + (15% x $1,004.68)
=$60.90 + $150.702
=$211.60
Singletary:
1. Round gross wages to the nearest dollar: $5,380
2. Determine the total personal allowances per pay period (in this case, 9). Look at
the number on page T-2 of handout and multiply it by the number of allowances
($266.67 x 9 = $2,400.03). Note: this amount is not taxable.
3. Subtract the nontaxable amount from the previous step from the employee’s gross
pay to find the taxable amount (also called “excess of wages over allowances
claimed”) $5,380 – $2,400.03 = $2,979.97
4. Determine the withholding tax on the excess of wages over allowances claimed
by referring to the appropriate Percentage Method Withholding Table on page T-3
of handout : $121.60 + (15% x [$2,979.97 - $1,883])
=$121.60 + (15% x $1,096.97)
=$121.60 + $164.5455
=$286.15
2006 4-3