Beth earns $3450 monthly, she is married and claims two exemptions. Find the FIT withheld from her montly check using the percentage method. I have:
2(195.83)= 391.66
3450-391.66 = 3058.34
0.15(3058.34-517)
0.15(2541.34)= $381
Stacy is single and claims one exemption earning $3400 per month.
What is her monthly FIT withholdings.
I have:
3400-195.83=3204.17
3204.17-1954=1250.17
261.60+0.28(1250.17)
261.60+350=611.60
$612
According to the FIT chart the first one should be $383 and the second one should be $406. I have checked and rechecked my figures several times and can't find where I am going wrong. Any help would be appreciated. Thanks.
To determine the monthly FIT (Federal Income Tax) withholdings using the percentage method, you need to follow these steps:
1. Calculate the monthly taxable income by subtracting the exemptions and any other pre-tax deductions from the monthly earnings.
2. Determine the base tax amount by using the tax brackets and rates provided by the IRS. The base tax is the tax owed on the lower end of the tax bracket that the taxable income falls into.
3. Calculate the additional tax on the excess income over the lower end of the tax bracket at the applicable rate.
4. Add the base tax and the additional tax to obtain the total FIT withholding.
Let's apply these steps to your examples:
Example 1: Beth's Monthly FIT Withholding
- Monthly earnings: $3,450
- Exemptions: 2
Step 1: Calculate the monthly taxable income
Monthly earnings - (Exemptions * Exemption Amount)
$3,450 - (2 * $195.83) = $3,058.34
Step 2: Determine the base tax
Look up the tax rate for the taxable income in the IRS tax brackets. Let's assume it's 15% for this example.
Base Tax = 15% * ($3,058.34 - $517)
Step 3: Calculate the additional tax
Additional Tax = 15% * ($3,058.34 - $517)
Step 4: Calculate the total FIT withholding
Total FIT Withholding = Base Tax + Additional Tax
Now, let's calculate the values for each step:
Step 2: Base Tax
Base Tax = 0.15 * ($2,541.34) = $381.20
Step 3: Additional Tax
Since the additional tax is calculated based on the excess income over the lower end of the tax bracket, in this case, it would be $381.20 as there is no additional income.
Step 4: Total FIT Withholding
Total FIT Withholding = $381.20 + $381.20 = $762.40
Therefore, the FIT withheld from Beth's monthly check using the percentage method should be $762.40, not $383.
Example 2: Stacy's Monthly FIT Withholding
- Monthly earnings: $3,400
- Exemptions: 1
Applying the same steps as in example 1:
Step 1: Calculate the monthly taxable income
Monthly earnings - (Exemptions * Exemption Amount)
$3,400 - (1 * $195.83) = $3,204.17
Step 2: Determine the base tax
Look up the tax rate for the taxable income in the IRS tax brackets. Let's assume it's 15% for this example.
Base Tax = 15% * ($3,204.17 - $517)
Step 3: Calculate the additional tax
Additional Tax = 15% * ($3,204.17 - $517)
Step 4: Calculate the total FIT withholding
Total FIT Withholding = Base Tax + Additional Tax
Let's calculate the values for each step:
Step 2: Base Tax
Base Tax = 0.15 * ($2,687.17) = $403.08
Step 3: Additional Tax
Since there is no additional income, the additional tax should be $0.
Step 4: Total FIT Withholding
Total FIT Withholding = $403.08
Therefore, the FIT withheld from Stacy's monthly check using the percentage method should be $403, not $406.
Based on these calculations, the values you provided are not accurate. Please recheck your calculations using the correct steps outlined above to determine the accurate FIT withholdings.