Jeff jones earns $1,200 per week. he is married and claims four withholding allowances. the social security rate is 6.2% on $118,500, and medicare is 1.45%. each paycheck, his employer also deducts $42.50 for health insurance. what is his net pay? (calculate fit by percentage method.)
so look up the % tax rate for his # deductions, and figure that.
Then add 6.2+1.45=7.65% withheld (since $1200/week is less than $118K/year)
then subtract that sum, as well as the 42.50 for insurance, from the $1200 gross pay.
What is left will be his net pay.
To calculate Jeff Jones's net pay, we'll need to consider federal income tax, social security tax, Medicare tax, and health insurance deductions. Let's break it down step by step:
1. Find the Social Security Tax:
The Social Security tax rate is 6.2% on the first $118,500 of earnings. Since we know Jeff's earnings per week are $1,200, we need to determine if this amount exceeds the $118,500 threshold.
If Jeff's annual earnings are less than or equal to $118,500 (52 weeks x $1,200), the Social Security tax amount will be 6.2% of $1,200. Otherwise, if Jeff's annual earnings exceed $118,500, the Social Security tax will be 6.2% of $118,500.
Let's calculate the Social Security tax:
Jeff's annual earnings = ($1,200 * 52 weeks) = $62,400
Social Security tax = 6.2% of $62,400
2. Find the Medicare Tax:
The Medicare tax rate is a flat 1.45% on all earnings, with no income threshold. So, we'll need to calculate 1.45% of Jeff's annual earnings.
Let's calculate the Medicare tax:
Medicare tax = 1.45% of $62,400
3. Calculate the Federal Income Tax:
To calculate the Federal Income Tax (FIT) using the percentage method, we'll need to use the appropriate tax brackets for Jeff's filing status (married, withholding four allowances).
First, we need to determine Jeff's annual taxable income based on his weekly earnings. To do this, we take his weekly earnings ($1,200) and multiply it by the number of weeks in a year (52).
Next, we calculate the amount Jeff can deduct based on his withholding allowances. To find the amount to deduct, we multiply the number of allowances (4) by the annual value of one allowance. We can find this value in the IRS publication or use the Automated Payroll Calculator.
Now, we have the annual taxable income and the amount we can deduct for allowances. With this information, we can refer to the tax brackets and calculate the Federal Income Tax.
4. Deduct Health Insurance:
Jeff's employer deducts $42.50 from his paycheck for health insurance. This amount needs to be subtracted from his gross pay.
Now that we have calculated each component, we can determine Jeff's net pay by subtracting the total deductions from his gross pay.
It's important to note that the precise calculations may depend on additional factors such as state income tax and other deductions. But this general explanation should help you understand how to calculate Jeff's net pay using the percentage method.