Question

Use the percentage method of income tax calculation to complete the payroll roster (in $).

David Grange is married and claims 4 withholding allowances. If he is paid biweekly and earns $1,844 per period, use the percentage method to find his income tax withholding each pay period. (Use Exhibit 9-1 and Exhibit 9-2 from your text. Round your answer to the nearest cent.)

Answer 1

To determine David Grange's income tax withholding per pay period, we must first calculate his taxable income, then use the tax tables to find the base tax and apply the marginal tax rate to the income exceeding the lower threshold for his income range. This figure must be adjusted biweekly. Additionally, the calculation should consider other deductions such as Social Security and Medicare taxes.

Step-by-step explanation:

To calculate the income tax withholding for David Grange using the percentage method, it is important to determine his taxable income first. Since the table and figures mentioned in the question are not provided, we will follow the general steps involved in such calculation, which typically include subtracting the total value of allowances from the gross income, referring to the relevant tax tables to find the base tax amount, and then applying the marginal tax rate to the income above the threshold.

Once the taxable income is determined, one would look up the tax table to find the initial base tax owed (if any) for that income range and add a certain percentage of the taxable income that exceeds the lower threshold of that range, following the structure mentioned in the example: 837.50 + 0.15 × (taxable income - 8,375). This result then must be adjusted for the pay period, in this case, biweekly, to find the withholding amount per paycheck.

Remember, social security deductions, which are 6.2% of the gross income, and Medicare deductions at 1.45% of the gross income, also need to be accounted for in payroll calculations, along with the federal and state tax withholdings that generally account for a percentage of the gross annual income.

Answer 2

Income tax withholding for David Grange is calculated by subtracting the value of withholding allowances from his gross biweekly pay to determine taxable income, then applying the tax rates provided in Exhibit 9-1 and Exhibit 9-2. An illustrative calculation would involve a base tax plus a percentage of the income over a certain threshold, but without the specific exhibits, precise withholding cannot be completed.

Step-by-step explanation:

To calculate the income tax withholding for David Grange, who is married and claims 4 withholding allowances, being paid biweekly and earning $1,844 per pay period, we must follow the percentage method of income tax calculation as represented in Exhibit 9-1 and Exhibit 9-2. While I do not have access to these exhibits, the general procedure would involve subtracting allowances from the gross pay to determine the taxable income and then applying the corresponding tax rate. An example of this method would be if David's taxable income was determined to be $20,000, according to the information provided, then his tax liability would be calculated as '837.50 + 0.15 × (20,000 - 8,375)', which equates to $2,581.25.

This formula illustrates that David's tax liability would be the sum of a base tax amount plus a percentage of income over a threshold level. To determine the exact withholding per pay period, calculations would need to follow the specific tax table pertinent to his pay and allowances.

Notably, allowances are used to adjust the amount of tax withheld from a paycheck, with each allowance effectively reducing the amount of taxable income. For accurate calculations, it's important to refer to the current tax year's IRS guidelines and tax rates, considering the impact of any deductions David may be eligible for.