Final answer:
Calculating taxes using the percentage method involves determining the gross pay, computing the withholding allowance deduction, and then applying the tiered tax rate to the remaining amount.
Step-by-step explanation:
To calculate taxes using the percentage method, you should follow this order: First, determine the gross pay, which is the total income before any deductions. Second, calculate the withholding allowance deduction, which is based on the number of allowances claimed by the employee. Third, apply the tiered tax rate to the remaining amount to find the amount of tax owed.
Gross pay refers to the total amount of income before any deductions or taxes are taken into account. The withholding allowance deduction is the amount subtracted from the gross pay for each withholding allowance claimed by the taxpayer. Finally, the tiered tax rate refers to the progressive tax rates that are applied to different income ranges.