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    Calculating Taxes Withheld and Net Pay

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    Reaves Professional Services has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:

    Consultant Computer Programmer Administrator

    Regular earning $3000 per week $24 per hour $36 per hour
    rate Not applicable 2 time hourly rate 2 times hourly rt overtime earnings

    Gross pay prior $118,000 $45,000 $99,000
    to current
    pay period

    Number of
    withholding 2 1 2

    For the current pay period, the computer programmer worked 50 hours and the administrator worked 46 hours. The federal income tax withheld for all three employees, who are single, can be determined from the wage bracket withholding in the following Exhibit. Assume further that the social security tax rate was 6.0% on the first $100,000 of annual earnings, the Medicare tax rate was 1.5%, and one withholding allowance is $67.

    Wage Bracket
    Withholding Table

    Table for Percentage Method of Withholding WEEKLY Payroll period
    (a) SINGLE person (including head of household)--

    If the amount of wages The amount of income tax
    (after subtracting to withhold is:
    withholding allowances) is: $0...............
    Not over $51.............

    Over-- But not Over-- Of excess over----
    $51 - $198 10% -$51
    $198 -$653 $14.70 plus 15% -$198
    $653 -$1533 $82.95 plus 25% -$653
    $1533 -$3,202 $302.95 plus 28% -$1533
    $3,202 -$6,916 $770.27 plus 33% -$3202
    $6916................ $1995.89 plus 35% -$6916

    Determine the gross pay and the net pay for each of the three employees for the current pay period.

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    Solution Summary

    This comprehensive solution illustrates how to compute withheld taxes (including using a tax table) and net pay from employees' paychecks.