. 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 deduct various withholdings and deductions from her gross income.
1. Calculate Federal Income Tax (FIT) withholding:
First, we need to determine Fran's taxable income. We subtract her total allowances from the gross income. Since Fran claims five withholding allowances, we subtract 5 x $4,300 (the 2022 allowance amount) from her gross income:
$4,300 * 5 = $21,500
Next, we calculate the FIT withholding amount using the tax brackets and rates for 2022. For simplicity, let's assume Fran falls into the 22% tax bracket for this example. We multiply her taxable income by the tax rate and divide by 12 (months in a year):
($21,500 * 0.22) / 12 = $393.33 (approx.)
2. Calculate Social Security and Medicare withholdings:
For Social Security, we subtract 6.2% (the current tax rate) of Fran's gross income:
$3,500 * 0.062 = $217.00 (approx.)
For Medicare, we subtract 1.45% (the current tax rate) of Fran's gross income:
$3,500 * 0.0145 = $50.75 (approx.)
3. Calculate State Income Tax withholding:
Fran pays 2.1% of her gross income for state income tax. We calculate it by multiplying her gross income by 0.021:
$3,500 * 0.021 = $73.50 (approx.)
4. Calculate State Disability Insurance withholding:
Fran pays 0.5% of her gross income for state disability insurance. We calculate it by multiplying her gross income by 0.005:
$3,500 * 0.005 = $17.50 (approx.)
5. Deduct other deductions from the gross income:
Fran pays $43.11 for life insurance and $72.30 to the credit union. We subtract these amounts from her gross income:
$3,500 - $43.11 - $72.30 = $3,384.59 (approx.)
6. Calculate the net take-home pay:
Finally, we subtract all the withholdings and deductions from Fran's gross income:
Gross income - (FIT + Social Security + Medicare + State Income Tax + State Disability Insurance + Other Deductions)
$3,500 - ($393.33 + $217.00 + $50.75 + $73.50 + $17.50 + $43.11 + $72.30) = $2,632.51 (approx.)
Therefore, Fran Mallory's net take-home pay per month is approximately $2,632.51.