Question

Brad earns $4960 per month. He is married and claims four exemptions. Use the percentage method to find the FIT (federal income tax) to be withheld from his monthly paycheck

Answer 1

Note: Since the earnings of Brad are only given and he is a married person, it falls under the head of Married Filing Separately. Had earnings of both Brad and his Wife would be given, then it would fall under the head of Married Filing Jointly.

Annual Earnings of Brad = $4960 × 12

= $59520

Using Withholding Rate Schedules considering (2020 or later) and the Percentage Method technique,

Net Exemption Amount (year) = $538 × 4 × 12 (assuming he is taking 1 exemption valuing of $538)

                                      = $25,824

∴ Adjusted earnings = $59520 – $25,824 = $33,696

∴ These adjusted earnings fall between the lower and upper limit of $26,263 – $48,963 as per Withholding Rate Schedules (2020) for Married Filing Separately.

∴ Amount to be withhold (year) = $2308.75 + 22% of (Adjusted Earnings – Lower Limit)

                             = $2308.75 + 22% of ($33,696 – $26,263)

                                = $2308.75 + $1635.26

                                = $3944.01 or $3944 (approx)

∴ Amount to be withheld from his monthly paycheck = $3944 ÷ 12

= $329 (approx)

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