A single person earns a gross biweekly salary of $780 and claims 6 exemptions. How does their net pay change due to the federal income tax withheld?
check your withholding tables.
To calculate how the federal income tax withheld affects the net pay, we need to understand how the tax is calculated. The federal income tax is based on a progressive tax system, where the tax rate increases as income increases.
Here's how to calculate the net pay with the federal income tax withheld:
1. Determine the gross income: In this case, the biweekly gross salary is $780.
2. Determine the taxable income: To determine the taxable income, subtract the exemptions from the gross income. Each exemption for the year 2021 is equal to $4,300. So, in this case, the taxable income is $780 - (6 * $4,300) = $780 - $25,800 = -$25,020.
Note: A negative taxable income means the individual has overclaimed exemptions resulting in a negative tax liability. In this case, the individual will owe no federal income tax and should not have any tax withheld.
3. Calculate the federal income tax: Once we have the taxable income, we can use the tax brackets and rates provided by the Internal Revenue Service (IRS) to calculate the federal income tax.
However, since the taxable income in this scenario is negative, the individual does not owe any federal income tax based on the given information. Therefore, no federal income tax would be withheld, and the net pay would remain unchanged at $780.
It's important to note that this calculation does not take into account other deductions or withholdings such as FICA taxes (Social Security and Medicare), state income taxes, or any voluntary withholdings like retirement contributions or insurance premiums. These factors may affect the net pay.