Question
Luis has a biweekly gross pay of $770 and claims 2 federal withholding allowances. Luis has all of the following deductions from his gross pay:
federal tax from the following table
A 9-column table with 7 rows is shown. Column 1 is labeled If the wages are at least with entries 720, 740, 760, 780, 800, 820, 840. Column 2 is labeled But less than with entries 740, 760, 780, 800, 820, 840, 860. Column 3 is labeled And the number of withholding allowances is 0, the amount of income tax withheld is, with entries 80, 83, 86, 89, 92, 95, 98. Column 4 is labeled And the number of withholding allowances is 1, the amount of income tax withheld is, with entries 62, 65, 68, 71, 74, 77, 80. Column 5 is labeled And the number of withholding allowances is 2, the amount of income tax withheld is, with entries 44, 47, 50, 53, 56, 59, 62. Column 6 is labeled And the number of withholding allowances is 3, the amount of income tax withheld is, with entries 26, 28, 31, 34, 37, 40, 43. Column 7 is labeled And the number of withholding allowances is 4, the amount of income tax withheld is, with entries 14, 16, 18, 20, 22, 24, 26. Column 8 is labeled And the number of withholding allowances is 5, the amount of income tax withheld is, with entries 1, 3, 5, 7, 9, 11, 13. Column 9 is labeled And the number of withholding allowances is 6, the amount of income tax withheld is, with entries 0, 0, 0, 0, 0, 0, 1.
Social Security tax that is 6.2% of his gross pay
Medicare tax that is 1.45% of his gross pay
state tax that is 19% of his federal tax
Determine how Luis’ net pay will be affected if he increases his federal withholding allowances from 2 to 3.
a.
His net pay will decrease by $19.00.
b.
His net pay will increase by $19.00.
c.
His net pay will decrease by $22.61.
d.
His net pay will increase by $22.61.
Please select the best answer from the choices provided
A
B
C
D
federal tax from the following table
A 9-column table with 7 rows is shown. Column 1 is labeled If the wages are at least with entries 720, 740, 760, 780, 800, 820, 840. Column 2 is labeled But less than with entries 740, 760, 780, 800, 820, 840, 860. Column 3 is labeled And the number of withholding allowances is 0, the amount of income tax withheld is, with entries 80, 83, 86, 89, 92, 95, 98. Column 4 is labeled And the number of withholding allowances is 1, the amount of income tax withheld is, with entries 62, 65, 68, 71, 74, 77, 80. Column 5 is labeled And the number of withholding allowances is 2, the amount of income tax withheld is, with entries 44, 47, 50, 53, 56, 59, 62. Column 6 is labeled And the number of withholding allowances is 3, the amount of income tax withheld is, with entries 26, 28, 31, 34, 37, 40, 43. Column 7 is labeled And the number of withholding allowances is 4, the amount of income tax withheld is, with entries 14, 16, 18, 20, 22, 24, 26. Column 8 is labeled And the number of withholding allowances is 5, the amount of income tax withheld is, with entries 1, 3, 5, 7, 9, 11, 13. Column 9 is labeled And the number of withholding allowances is 6, the amount of income tax withheld is, with entries 0, 0, 0, 0, 0, 0, 1.
Social Security tax that is 6.2% of his gross pay
Medicare tax that is 1.45% of his gross pay
state tax that is 19% of his federal tax
Determine how Luis’ net pay will be affected if he increases his federal withholding allowances from 2 to 3.
a.
His net pay will decrease by $19.00.
b.
His net pay will increase by $19.00.
c.
His net pay will decrease by $22.61.
d.
His net pay will increase by $22.61.
Please select the best answer from the choices provided
A
B
C
D
Answers
Answered by
GPT-4o mini
To determine how Luis' net pay will be affected if he increases his federal withholding allowances from 2 to 3, we first need to calculate the deductions from his gross pay for both scenarios.
**Step 1: Calculate deductions with 2 allowances.**
1. **Federal Tax:**
- From the table, if Luis has a gross pay of $770 and claims 2 allowances, the federal tax withheld is $50 (from the corresponding entry for wages of $760 to $780 with 2 allowances).
2. **Social Security Tax:**
- Social Security tax = 6.2% of $770
- Social Security tax = 0.062 * 770 = $47.74
3. **Medicare Tax:**
- Medicare tax = 1.45% of $770
- Medicare tax = 0.0145 * 770 = $11.15
4. **State Tax:**
- State tax = 19% of federal tax
- State tax = 0.19 * 50 = $9.50
**Total deductions for 2 allowances:**
- Federal Tax = $50.00
- Social Security Tax = $47.74
- Medicare Tax = $11.15
- State Tax = $9.50
**Total deductions = $50.00 + $47.74 + $11.15 + $9.50 = $118.39**
**Step 2: Calculate net pay with 2 allowances.**
- Gross Pay = $770
- Net Pay = Gross Pay - Total Deductions
- Net Pay = $770 - $118.39 = $651.61
**Step 3: Calculate deductions with 3 allowances.**
1. **Federal Tax:**
- From the table, if Luis has a gross pay of $770 and claims 3 allowances, the federal tax withheld is $34 (from the corresponding entry for wages of $760 to $780 with 3 allowances).
2. **Social Security Tax:**
- The Social Security tax remains the same: $47.74
3. **Medicare Tax:**
- The Medicare tax also remains the same: $11.15
4. **State Tax:**
- State tax = 19% of federal tax
- State tax = 0.19 * 34 = $6.46
**Total deductions for 3 allowances:**
- Federal Tax = $34.00
- Social Security Tax = $47.74
- Medicare Tax = $11.15
- State Tax = $6.46
**Total deductions = $34.00 + $47.74 + $11.15 + $6.46 = $99.35**
**Step 4: Calculate net pay with 3 allowances.**
- Gross Pay = $770
- Net Pay = Gross Pay - Total Deductions
- Net Pay = $770 - $99.35 = $670.65
**Step 5: Calculate the effect on net pay by moving from 2 allowances to 3 allowances.**
- Increase in Net Pay = Net Pay (3 allowances) - Net Pay (2 allowances)
- Increase in Net Pay = $670.65 - $651.61 = $19.04
**Conclusion:**
Since the closest answer choice is $19.00 (option B):
**The correct answer is: B. His net pay will increase by $19.00.**
**Step 1: Calculate deductions with 2 allowances.**
1. **Federal Tax:**
- From the table, if Luis has a gross pay of $770 and claims 2 allowances, the federal tax withheld is $50 (from the corresponding entry for wages of $760 to $780 with 2 allowances).
2. **Social Security Tax:**
- Social Security tax = 6.2% of $770
- Social Security tax = 0.062 * 770 = $47.74
3. **Medicare Tax:**
- Medicare tax = 1.45% of $770
- Medicare tax = 0.0145 * 770 = $11.15
4. **State Tax:**
- State tax = 19% of federal tax
- State tax = 0.19 * 50 = $9.50
**Total deductions for 2 allowances:**
- Federal Tax = $50.00
- Social Security Tax = $47.74
- Medicare Tax = $11.15
- State Tax = $9.50
**Total deductions = $50.00 + $47.74 + $11.15 + $9.50 = $118.39**
**Step 2: Calculate net pay with 2 allowances.**
- Gross Pay = $770
- Net Pay = Gross Pay - Total Deductions
- Net Pay = $770 - $118.39 = $651.61
**Step 3: Calculate deductions with 3 allowances.**
1. **Federal Tax:**
- From the table, if Luis has a gross pay of $770 and claims 3 allowances, the federal tax withheld is $34 (from the corresponding entry for wages of $760 to $780 with 3 allowances).
2. **Social Security Tax:**
- The Social Security tax remains the same: $47.74
3. **Medicare Tax:**
- The Medicare tax also remains the same: $11.15
4. **State Tax:**
- State tax = 19% of federal tax
- State tax = 0.19 * 34 = $6.46
**Total deductions for 3 allowances:**
- Federal Tax = $34.00
- Social Security Tax = $47.74
- Medicare Tax = $11.15
- State Tax = $6.46
**Total deductions = $34.00 + $47.74 + $11.15 + $6.46 = $99.35**
**Step 4: Calculate net pay with 3 allowances.**
- Gross Pay = $770
- Net Pay = Gross Pay - Total Deductions
- Net Pay = $770 - $99.35 = $670.65
**Step 5: Calculate the effect on net pay by moving from 2 allowances to 3 allowances.**
- Increase in Net Pay = Net Pay (3 allowances) - Net Pay (2 allowances)
- Increase in Net Pay = $670.65 - $651.61 = $19.04
**Conclusion:**
Since the closest answer choice is $19.00 (option B):
**The correct answer is: B. His net pay will increase by $19.00.**
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