Question

An employee earns a gross pay of $1,200.00 per week. The employee’s net pay is $850.00. The employee’s voluntary 401(k) contribution is $50.00 per month.

There was blank deducted for taxes. The tax rate is blank. Find the tax rate.

Answer 1

To find the tax rate, you first subtract the weekly 401(k) contribution from the gross pay to get the taxable income and then divide the tax deduction by this value. Multiplying by 100% gives you the percentage tax rate.

Step-by-step explanation:

To determine the tax rate for an employee earning a gross pay of $1,200.00 per week and a net pay of $850.00, with a 401(k) contribution of $50.00 per month, we must first calculate the total deductions from the gross pay. Since the 401(k) contribution is monthly, we convert it to weekly by dividing by the number of weeks in a month. The contribution per week is therefore $50.00 / (52 weeks / 12 months) = $11.54 approximately. With this, the gross pay for tax calculations is $1,200.00 - $11.54 = $1,188.46.

The difference between the employee's gross and net pay, excluding their 401(k) contribution, represents the amount deducted for taxes: $1,200.00 - $850.00 = $350.00 tax deduction per week. To find the tax rate, we divide the weekly tax deduction by the weekly gross pay (after 401(k) contribution). The tax rate is ($350.00 / $1,188.46) × 100%, which gives us an approximate tax rate.