Fran Mallory is married, claims five withholding allowances, and earns $3,500 (gross) per month. In addition to Federal income tax (FIT), social security, and Medicare withholding, Fran pays 2.1% state income tax, and ½% for state disability insurance (both based on her gross income), plus an additional $43.11 for life insurance and $72.30 to the credit union. As payroll manager for Fran’s company, calculate her net take-home pay per month.
To calculate Fran Mallory's net take-home pay per month, we need to subtract various deductions from her gross income. Let's break down the calculation step by step:
1. Start with Fran's gross income per month: $3,500.
2. Calculate the Federal income tax (FIT) withholding:
Determine Fran's withholding allowances: 5.
Use the IRS withholding tables or online calculator to find the FIT withholding amount based on her taxable income, withholding allowances, and pay frequency. For example, if Fran earns a monthly salary and claims 5 allowances, the FIT withholding might be $300 per month.
3. Calculate social security (6.2%) and Medicare (1.45%) withholding:
Social Security: Multiply Fran's gross income by 6.2%.
Medicare: Multiply Fran's gross income by 1.45%.
For example:
Social Security withholding: $3,500 * 0.062 = $217.
Medicare withholding: $3,500 * 0.0145 = $51.
4. Calculate state income tax withholding:
Multiply Fran's gross income by the state income tax rate (2.1%) to determine the state income tax withholding amount.
For example:
State income tax withholding: $3,500 * 0.021 = $73.50.
5. Calculate state disability insurance withholding:
Multiply Fran's gross income by the state disability insurance rate (0.5%) to find the state disability insurance withholding amount.
For example:
State disability insurance withholding: $3,500 * 0.005 = $17.50.
6. Subtract other deductions:
Subtract the additional deductions for life insurance ($43.11) and the credit union ($72.30).
For example:
Life insurance deduction: $43.11
Credit union deduction: $72.30
7. Calculate the net take-home pay:
Subtract all the deductions from Fran's gross income:
Net take-home pay = Gross income - FIT - Social security - Medicare - State income tax - State disability insurance - Life insurance - Credit union.
For example:
Net take-home pay = $3,500 - $300 - $217 - $51 - $73.50 - $17.50 - $43.11 - $72.30.
By following these steps, you can calculate Fran Mallory's net take-home pay per month as per the given information and deductions.