Example4.2.docx
Example 4-3
To compute the tax using the 2023 Percentage Method for Manual Payroll Systems With Forms W-4 From 2020 or Later using Standard Withholding Rate Schedules, follow the steps illustrated below.
Step 1
Determine the amount of gross wages earned, filing status, adjustments on Form W-4, 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 (S), has no adjustments on his Form W-4 and earns $915.60 semimonthly.
Step 2 Determine the withholding tax by referring to the appropriate Percentage Method Withholding Table (see Figure 4.6 below).
➡
Compute tax from Tax Table A, Semimonthly, Standard Withholding Rate Schedule, page T-3. ($915.60 – $577.00 = $338.60 × 10% = $33.86 + $0) = $33.86
Use the percentage method to compute the federal income taxes to withhold from the wages or salaries of each employee. If an amount is zero, enter “0”. If required, round your calculations and final answers to the nearest cent.
As we go to press, the federal income tax rates for 2024 are being determined by budget talks in Washington, and are not available for publication. For this edition, the 2023 federal income tax tables for Manual Systems with Forms W-4 From 2020 or Later with Standard Withholding and 2023 FICA rates have been used.
Click here to access the Percentage Method Tables.
Employee No.
Employee Name
Filing Status
No. of Withholding Allowances
Gross Wage or Salary
Amount to Be Withheld
1
James, A.
MFJ
N/A
$1,610
weekly
fill in the blank 1 of 4$
2
Lake, R.
S
N/A
825
biweekly
fill in the blank 2 of 4
3
Walls, S.
MFJ
N/A
925
semimonthly
fill in the blank 3 of 4
4
Free, Y.
MFJ
N/A
2,875
monthly
fill in the blank 4 of 4
image1.wmf
Example4.4.docx
Example 4-12
GROSSING-UP. Cotter Company wants to award a $4,000 bonus to Donna D’Amico. In addition, it wants the net bonus payment to equal $4,000. Assuming D’Amico is still under the OASDI/FICA limit, the calculation would be:
A.
$4,000
1 – 0.22 (Supplemental W/H rate) – 0.062 (OASDI) – 0.0145 (HI)
B.
$4,000
= $5,685.86 grossed-up bonus
0.7035
Line Item Description
Amount
C.
Gross bonus amount
$5,685.85*
Federal income tax withheld
1,250.89
OASDI tax withheld
352.52
HI tax withheld
82.44
Take-home bonus check
$4,000.00
If state or local taxes apply, they must also be included in the formula.
*Need to subtract $0.01 from $5,685.86 in order to arrive at $4,000.00 (due to rounding).
Damerly Company (a Utah employer) wants to give a holiday bonus check of $250 to each employee. Since it wants the check amount to be $250, it will need to gross-up the amount of the bonus. Calculate the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative earnings for the year are $46,910. Besides being subject to social security taxes and federal income tax (supplemental rate), a 4.95% Utah income tax must be withheld on supplemental payments.
Enter deductions beginning with a minus sign (-). You may need to adjust by a penny (subtract or add) to the gross amount to get net pay to calculate exactly to $250.00. Round your calculations and final answers to the nearest cent.
As we go to press, the federal income tax rates for 2024 are being determined by budget talks in Washington, and are not available for publication. For this edition, the 2023 federal income tax tables for Manual Systems with Forms W-4 From 2020 or Later with Standard Withholding and 2023 FICA rates have been used.
Line Item Description
Amount
Gross bonus amount
fill in the blank 1 of 6$
Federal income tax withheld
fill in the blank 2 of 6
OASDI tax withheld
fill in the blank 3 of 6
HI tax withheld
fill in the blank 4 of 6
Utah income tax withheld
fill in the blank 5 of 6$
Take-home bonus check
fill in the blank 6 of 6$
image1.wmf
Example4.1.docx
Example 4-1
Justin Miah, single, is a waiter at Metro American Bar and Grill. In his first week, he earned $350 for 20 hours and had $600 of reported tips. Justin’s employer will withhold Federal Income tax based on the total of $950. Net pay is calculated by subtracting the withholding amounts from employer paid earnings of $350.
Example 4-4
To use the 2023 Wage Bracket Method for Manual Payroll Systems With Forms W-4 From 2020 or Later using Standard Withholding, follow the steps illustrated below.
Step 1
Select the withholding table that applies to the employee’s pay period.
➡
Adrienne Huff is married filing jointly (MFJ). 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 $815 but less than $825
Step 3
Follow the line for the wage bracket across to the right to the column showing the appropriate filing status with standard withholding. Withhold this amount of tax.
➡
Move across the line to the column showing Married Filing Jointly, Standard withholding.
The tax to withhold is $29.
Justin Matthews is a waiter at the Duluxe Lounge. In his first weekly pay in March, he earned $300.00 for the 40 hours he worked. In addition, he reports his tips for February to his employer ($500.00), and the employer withholds the appropriate taxes for the tips from this first pay in March.
Calculate his net take-home pay assuming the employer withheld federal income tax ( wage-bracket, married filing jointly), social security taxes, and state income tax (2%).
Enter deductions beginning with a minus sign (-).
As we go to press, the federal income tax rates for 2024 are being determined by budget talks in Washington, and are not available for publication. For this edition, the 2023 federal income tax tables for Manual Systems with Forms W-4 From 2020 or Later with Standard Withholding and 2023 FICA rates have been used.
Click here to access the Wage-Bracket Method Tables.
Line Item Description
Amount
Gross pay
fill in the blank 1 of 6$
Federal income tax
fill in the blank 2 of 6
Social security taxes – OASDI
fill in the blank 3 of 6
Social security taxes – HI
fill in the blank 4 of 6
State income tax
fill in the blank 5 of 6
Net pay
fill in the blank 6 of 6$
image1.wmf
ContinuingPayrollProblem4.docx
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