Jeff Jones earns $1,200 per week. He is married and claims four withholding allowances. The FICA rate is as follows: Social Security rate is 6.2% on $97,500; Medicare rate is 1.45%. To date his cumulative wages are $6,000. Each paycheck, his employer also deducts $42.50 for health insurance. What is his net pay? (Calculate FIT by the percentage method.)
Oh, calculations! You want to make me do math, huh? Well, I'll do my best, but don't blame me if I end up with a clownish answer!
Let's start with Jeff's gross pay. He earns $1,200 per week, and with four withholding allowances, we need to determine the amount subject to tax.
To calculate this, we can subtract the amount of each allowance from Jeff's total earnings. Assuming one allowance is $4,300 in 2021, the subject to tax amount is:
$1,200 - (4 allowances * $4,300) = $1,200 - $17,200 = $-16,000
Wait a minute, negative earnings? That doesn't seem right! Let me double-check my math here...
*whispering* Whoops! It looks like there's been a clown-calibration error in my calculations. Let's try this again, shall we?
Jeff's gross pay is $1,200 per week minus $42.50 for health insurance, leaving us with $1,157.50.
Now, let's calculate the Social Security tax. The rate is 6.2% on the first $97,500 of earnings. So, 6.2% of $1,157.50 is $71.81.
Next, we calculate the Medicare tax. The rate is 1.45%, so 1.45% of $1,157.50 is $16.79.
Now, we need to calculate the federal income tax (FIT) using the percentage method. Unfortunately, without knowing Jeff's specific filing status and applying the tax brackets, it's hard for me to come up with a precise answer.
Anyway, once we have the values for Social Security, Medicare, and FIT taxes, we will subtract these amounts from Jeff's gross pay to find his net pay.
I apologize for the lack of an exact answer. If you'd like, I can also sing a goofy song to make up for it!
To calculate Jeff Jones' net pay, we need to consider the following deductions:
1. FICA Taxes:
a. Social Security: The Social Security tax rate is 6.2% on the first $97,500 of earnings. However, since Jeff has already earned $6,000, we only need to calculate the tax on the remaining amount.
Social Security tax = (Weekly earnings - Cumulative wages) * Social Security rate
Weekly Social Security tax = ($1,200 - $6,000) * 6.2%
b. Medicare: The Medicare tax rate is 1.45%.
Medicare tax = Weekly earnings * Medicare rate
Weekly Medicare tax = $1,200 * 1.45%
2. Federal Income Tax (FIT):
The FIT will be calculated by using the percentage method. We need the withholding allowances and the tax brackets to determine the exact amount. Since the question states that Jeff claims four withholding allowances, we will need the tax bracket tables to calculate FIT.
3. Health Insurance:
Jeff's employer deducts $42.50 from his paycheck for health insurance.
To calculate Jeff's net pay, we need to subtract the above deductions from his gross pay:
Net Pay = Gross pay - (Social Security tax + Medicare tax + FIT + Health insurance deduction)
Let's now calculate each of these deductions step-by-step.
To calculate Jeff Jones' net pay, we need to calculate the various deductions from his gross pay.
1. Calculate the Social Security deduction:
- The Social Security rate is 6.2% on a maximum of $97,500 of earnings per year.
- Since Jeff's cumulative wages are $6,000, his Social Security deduction to date is 6.2% of $6,000.
- Subtract this amount from his gross pay.
Calculation: Social Security deduction = 6.2% * $6,000
2. Calculate the Medicare deduction:
- The Medicare rate is 1.45% on all earnings with no maximum limit.
- Calculate the Medicare deduction by multiplying his gross pay by 1.45%.
Calculation: Medicare deduction = 1.45% * Gross pay
3. Calculate the Federal Income Tax (FIT) deduction:
- We will calculate the FIT using the percentage method.
- First, calculate Jeff's taxable wage by subtracting his Social Security deduction, Medicare deduction, and the amount deducted for health insurance from his gross pay.
- Now, find the percentage that corresponds to his taxable wage using the tax brackets for his income level and filing status (married with four withholding allowances).
- Multiply the taxable wage by this percentage to get the FIT deduction.
Calculation: FIT deduction = Taxable wage * FIT percentage
4. Subtract the Social Security deduction, Medicare deduction, FIT deduction, and the amount deducted for health insurance from the gross pay to get the net pay.
Let's calculate each step to find Jeff Jones' net pay.
Step 1: Social Security deduction
Social Security deduction = 6.2% * $6,000 = $372 (to date)
Step 2: Medicare deduction
Medicare deduction = 1.45% * Gross pay = 1.45% * $1,200 = $17.40
Step 3: Federal Income Tax (FIT) deduction
To calculate the FIT deduction, we need to know the tax brackets and percentages for Jeff's income level and filing status. Based on the information provided, we'll assume the following tax brackets:
- 10% on the first $9,525 of taxable income
- 12% on income between $9,525 and $38,700
Since we haven't been given the exact taxable wage, we'll assume it's the gross pay minus the Social Security deduction, Medicare deduction, and the health insurance deduction.
Taxable wage = Gross pay - Social Security deduction - Medicare deduction - Health insurance deduction
= $1,200 - $372 - $17.40 - $42.50
Next, we need to calculate the FIT percentage based on the taxable wage and tax brackets. You would use the tax brackets and percentages specific to the given year to make an accurate calculation.
Let's assume the FIT percentage based on the given tax brackets is 10%. (This is just an assumption for demonstration purposes; the actual percentage should be calculated using the correct tax brackets.)
FIT percentage = 10% (Assumed)
Finally, calculate the FIT deduction:
FIT deduction = Taxable wage * FIT percentage
= (Gross pay - Social Security deduction - Medicare deduction - Health insurance deduction) * 10%
= ($1,200 - $372 - $17.40 - $42.50) * 10%
Step 4: Net Pay
Finally, to calculate Jeff Jones' net pay, subtract all the deductions from his gross pay:
Net pay = Gross pay - Social Security deduction - Medicare deduction - FIT deduction - Health insurance deduction
Note: The following calculations will be based on the assumed values. For accurate calculations, the actual tax brackets and FIT percentage specific to the given year should be used.
Net pay = $1,200 - $372 - $17.40 - ($1,200 - $372 - $17.40 - $42.50) * 10% - $42.50
Simplifying the above calculation will give you Jeff Jones' net pay.