Question

Cross receives a monthly paycheck from a bakery plant of $3,500.30. She is married and is entitled to 3 withholding allowances. How much is her taxable income? Use the percentage method tables in Exhibits 9-1 and 9-2 from your text.

Answer 1

Cross's taxable income is $2,425.30 per month

AGI is the income after subtracting certain allowable deductions.

Cross's monthly paycheck is $3,500.30.

Gross Income = $3,500.30

Taxable Income = AGI - (Withholding Allowances * Withholding Allowance Amount)

The withholding allowance amount is an estimate of the portion of income not subject to tax, and it's determined by the IRS. For 2022, each withholding allowance is approximately $4,300 annually.

Withholding Allowance Amount = $4,300 / 12

≈ $358.33

Taxable Income = $3,500.30 - (3 * $358.33)

Taxable Income = $3,500.30 - $1,075.00

Taxable Income = $2,425.30