Final answer:
(a) Weekly gross pay = $8.50 per hour × 21 hours per week = $184.50
(b) Weekly federal tax withholding = $184.50 gross pay × 0.10 federal tax rate = $18.45
(c) Weekly FICA tax withholding = $184.50 gross pay × 0.0765 FICA tax rate = $13.96
(d) Weekly state tax withholding (assuming a 5% state tax rate) = $184.50 gross pay × 0.05 state tax rate = $9.23
(e) Weekly net pay = $184.50 gross pay - $18.45 federal tax withholding - $13.96 FICA tax withholding - $9.23 state tax withholding = $141.76
Step-by-step explanation:
When working part-time at a local supermarket, the employee's hourly wage is $8.50, and they work for 21 hours a week. The employer withholds taxes from the employee's gross pay to meet their tax obligations. The federal government imposes a 10% income tax on the employee's gross income, while the FICA taxes (Social Security and Medicare) are set at a combined rate of 7.65%. In addition, some states impose their own income taxes, which vary by state and income level.
To calculate the employee's weekly gross pay, we multiply their hourly wage by the number of hours worked in a week: $8.50 per hour × 21 hours per week = $184.50. The employer then withholds taxes from this gross pay amount to meet their tax obligations.
The federal government imposes a 10% income tax on the employee's gross income, which means that for every dollar earned, the employee pays 10 cents in federal income tax. To calculate the amount of federal taxes withheld from the employee's weekly gross pay, we multiply the gross pay by the federal tax rate: $184.50 weekly gross pay × 0.10 federal tax rate = $18.45 in federal taxes withheld per week.
The FICA taxes are set at a combined rate of 7.65%, which is split between Social Security (6.2%) and Medicare (1.45%). To calculate the amount of FICA taxes withheld from the employee's weekly gross pay, we multiply the gross pay by the FICA tax rate: $184.50 weekly gross pay × 0.0765 FICA tax rate = $13.96 in FICA taxes withheld per week ($9.36 for Social Security and $4.60 for Medicare).
Some states also impose their own income taxes, which vary by state and income level. For this example, we assume that the employee lives in a state with a 5% state income tax rate, which means that for every dollar earned, the employee pays 5 cents in state income tax. To calculate the amount of state taxes withheld from the employee's weekly gross pay, we multiply the gross pay by the state tax rate: $184.50 weekly gross pay × 0.05 state tax rate = $9.23 in state taxes withheld per week.
After subtracting all of these taxes from the employee's weekly gross pay, we can calculate their net take-home pay for the week: Weekly net pay = Weekly gross pay - Federal taxes withheld - FICA taxes withheld - State taxes withheld: $184.50 weekly gross pay - $18.45 federal taxes withheld - $13.96 FICA taxes withheld - $9.23 state taxes withheld = $141.76 in net take-home pay for the week ($827 on an annualized basis).