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. (Points : 3)
To calculate Fran Mallory's net take-home pay per month, you need to deduct the following from her gross income:
1. Federal Income Tax (FIT):
- Determine the federal income tax withholding based on her marital status and number of allowances. You would need to refer to the federal income tax withholding tables or use a calculator to compute this amount.
2. Social Security and Medicare Withholding:
- Determine the Social Security tax by multiplying her gross income by 6.2%
- Determine the Medicare tax by multiplying her gross income by 1.45%
3. State Income Tax:
- Calculate the state income tax by multiplying her gross income by 2.1%
4. State Disability Insurance:
- Calculate the state disability insurance by multiplying her gross income by 0.5%
5. Additional Deductions:
- Subtract $43.11 for life insurance
- Subtract $72.30 for credit union
Once all the deductions are calculated, subtract the total deductions from Fran's gross income of $3,500 to find her net take-home pay per month.
To calculate Fran Mallory's net take-home pay per month, we would need to deduct various taxes and deductions from her gross income.
1. Start with Fran's gross income: $3,500 per month.
2. Calculate the Federal income tax (FIT) withholding. The amount withheld depends on Fran's filing status and income tax brackets. Since we don't have that information, we will assume a standard withholding rate. You can refer to the IRS withholding tables or use an online calculator to find the specific amount.
3. Calculate the Social Security withholding. The current rate for Social Security tax is 6.2%, and it is applied to the first $142,800 of annual income. Divide this annual limit by 12 months to get the monthly limit. Multiply Fran's gross income by 6.2% to find the Social Security withholding.
4. Calculate the Medicare withholding. The current rate for Medicare tax is 1.45% on all earnings. Multiply Fran's gross income by 1.45% to find the Medicare withholding.
5. Calculate the state income tax. Fran pays 2.1% of her gross income for state income tax. Multiply Fran's gross income by 2.1% to find the amount withheld for state income tax.
6. Calculate the state disability insurance. Fran pays 0.5% of her gross income for state disability insurance. Multiply Fran's gross income by 0.5% to find the amount withheld for state disability insurance.
7. Deduct the amounts for life insurance and the credit union. Subtract $43.11 (life insurance) and $72.30 (credit union) from Fran's gross income.
8. Add up all the deductions (Federal income tax, Social Security, Medicare, state income tax, state disability insurance, life insurance, and credit union) and subtract them from Fran's gross income to find her net take-home pay per month.
Please note that this calculation is an example, and tax amounts can vary based on individual circumstances. It is always advisable to consult with a tax professional or use official tax calculators for accurate and up-to-date information.