Consultant Computer Programmer Administrator
Regular earnings rate $3,800 per week $40 per hour $44 per hour
Overtime earnings rate* Not applicable 1.5 times hourly rate 2 times hourly rate
Number of withholding allowances 2 2 1
* For hourly employees, overtime is paid for hours worked in excess of 40 hours per week.
For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income tax withheld for all three employees, who are single, can be determined from the wage bracket withholding table in Exhibit 3 in the chapter. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and one withholding allowance is $70.
Determine the gross pay and the net pay for each of the three employees for the
current pay period.
Answer:
Computer
Consultant Programmer Administrator
Regular earnings……………………………… $3,800.00 $1,600.00 $1,760.00
Overtime earnings……………………………… 1,200.00 880.00
Gross pay………………………………………… $3,800.00 $2,800.00 $2,640.00
Less: Social security tax…………………… $ 228.001
Medicare tax…………………………… 57.004
$ 168.002
42.005
$ 158.40 3
39.60 6
Federal income tax withheld……… 904.06 610.76 585.56
$1,189.06 $ 820.76 $ 783.56
Net pay…………………………………………… $2,610.94 $1,979.24 $1,856.44
1 6.0% × $3,800.00 = $228.00
2 6.0% × $2,800.00 = $168.00
3 6.0% × $2,640.00 = $158.40
4 1.5% × $3,800.00 = $57.00
5 1.5% × $2,800.00 = $42.00
6 1.5% × $2,640.00 = $39.60
Withholding supporting calculations:
Computer
Consultant Programmer Administrator
Gross weekly pay……………………………… $3,800.00 $2,800.00 $2,640.00
Number of withholding allowances………… 2 2 1
Multiplied by: Value of one allowance……… × $70.00 × $70.00 × $70.00
Amount to be deducted……………………… $ 140.00 $ 140.00 $ 70.00
Amount subject to withholding…………… $3,660.00 $2,660.00 $2,570.00
Initial withholding from wage bracket
in Exhibit 3…………………………………… $ 816.28 $ 327.40 $ 327.40
Plus: Bracket percentage over
bracket excess……………………………… 87.78 7 283.36 8 258.16 9
Amount withheld……………………………… $ 904.06 $ 610.76 $ 585.56
7 33% × ($3,660 – $3,394)
8 28% × ($2,660 – $1,648)
9 28% × ($2,570 – $1,648)