Question

For each employee listed, use both the wage-bracket method and the percentage method to calculate the federal income tax withholding. Refer to Appendix A, 2017 and Appendix 2018 Federal Tax Tables. I need to see the step by step for both 2017 Tax Table calculation and the 2018 Tax Table calculation.

Thank you!

Pedro Evans (married, 3 withholding allowance) earned weekly gross pay of $1,819.00.

Using wage bracket method: Federal income tax withholding=$_________________

Using percentage method; Federal income tax withholding=$____________________

GL Dear (married, 4 withholding allowance) earned weekly gross pay of $2,560.00.

Using wage bracket method: Federal income tax withholding=$_________________

Using percentage method; Federal income tax withholding=$____________________

Answer 1

Formula sheet

A	B	C	D	E	F
2		Using 2017 tax table:
3
4		Using the Percentage Method:
5		Employee Name	Status	No. Allowances	Gross Wages or Salary	Pay Cycle
6		Pedro Evans	M	3	1819	weekly
7		GL Dear	M	4	2560	weekly
8
9		The federal income tax calculated using the percentage method include calculation of taxable wage
10		by substracting the withheld allowance from the gross pay.
11		Then using the percentage method table and the taxable amount the federal income tax (FIT) can be calculated.
12		Payroll Period	One Withholding Allowance (2017)
13		Weekly	77.9
14
15		Employee Name	No. Allowances	Pay Cycle	Withheld Allowance
16		Pedro Evans	3	weekly	=D16*D13
17		GL Dear	4	weekly	=D17*D13
18
19		Employee Name	Gross Wage	Withheld Allowance	Taxable Income	Pay Cycle	Status	FIT (Using % Table of 2017 for corresponding pay cycle and status)
20		Pedro Evans	=F6	=F16	=D20-E20	weekly	M	=35.9+15%*(F20-525)	In the range $525 to $1626
21		GL Dear	=F7	=F17	=D21-E21	weekly	M	=201.05+25%*(F21-1626)	In the range $1626 to $3,111
22
23		Hence using % method,
24		Employee Name	FIT
25		Pedro Evans	=I20
26		GL Dear	=I21
27
28
29		Using Wage Bracket Method:
30
31		Employee Name	Status	No. Allowances	Gross Wages or Salary	Pay Cycle
32		Pedro Evans	M	3	1819	weekly
33		GL Dear	M	4	2560	weekly
34
35		In the wage Bracket method, wage bracket table is used to find the federal income tax for
36		the gross pay with corresponding Allowances for given pay cycle and status.
37		Using the wage bracket table for 2017, for married person and weekly payment, the maximum salary that can be determined using wage bracket method is $1490.
38		Above weekly income of $1490, the percentable tax table for married person to be used.
39		Here for both the employees, the weekly income is higher than $1490, therefore income tax needs to be calculated using % table which will same as calculated above.
40
41		Employee Name	Status	No. Allowances	Gross Wages or Salary	Pay Cycle	FIT
42		Pedro Evans	M	3	=F32	weekly	=I20
43		GL Dear	M	4	=F33	weekly	=I21
44
45		Hence using wage bracket method,
46		Employee Name	FIT
47		Pedro Evans	=H42
48		GL Dear	=H43
49
50
51		Using 2018 tax table:
52
53		Using the Percentage Method:
54		Employee Name	Status	No. Allowances	Gross Wages or Salary	Pay Cycle
55		Pedro Evans	M	3	1819	weekly
56		GL Dear	M	4	2560	weekly
57
58		The federal income tax calculated using the percentage method include calculation of taxable wage
59		by substracting the withheld allowance from the gross pay.
60		Then using the percentage method table and the taxable amount the federal income tax (FIT) can be calculated.
61		Payroll Period	One Withholding Allowance (2018)
62		Weekly	79.8
63
64		Employee Name	No. Allowances	Pay Cycle	Withheld Allowance
65		Pedro Evans	3	weekly	=D65*D62
66		GL Dear	4	weekly	=D66*D62
67
68		Employee Name	Gross Wage	Withheld Allowance	Taxable Income	Pay Cycle	Status	FIT (Using % Table of 2018 for corresponding pay cycle and status)
69		Pedro Evans	=F55	=F65	=D69-E69	weekly	M	=36.6+12%*(F69-588)	In the range $588 to $1711
70		GL Dear	=F56	=F66	=D70-E70	weekly	M	=171.36+22%*(F70-1711)	In the range $1711 to $3,395
71
72		Hence using % method,
73		Employee Name	FIT
74		Pedro Evans	=I69
75		GL Dear	=I70
76
77
78		Using Wage Bracket Method:
79
80		Employee Name	Status	No. Allowances	Gross Wages or Salary	Pay Cycle
81		Pedro Evans	M	3	1819	weekly
82		GL Dear	M	4	2560	weekly
83
84		In the wage Bracket method, wage bracket table is used to find the federal income tax for
85		the gross pay with corresponding Allowances for given pay cycle and status.
86		Using the wage bracket table for 2018, for married person and weekly payment, the maximum salary that can be determined using wage bracket method is $1575.
87		Above weekly income of $1575, the percentable tax table for married person to be used.
88		Here for both the employees, the weekly income is higher than $1490, therefore income tax needs to be calculated using % table which will same as calculated above.
89
90		Employee Name	Status	No. Allowances	Gross Wages or Salary	Pay Cycle	FIT
91		Pedro Evans	M	3	=F81	weekly	=I69
92		GL Dear	M	4	=F82	weekly	=I70
93
94		Hence using wage bracket method,
95		Employee Name	FIT
96		Pedro Evans	=H91
97		GL Dear	=H92
98