2.1: Federal Income Tax - HITCHENS

2.1: Federal Income Tax

Objective: SWBAT read tables to find the amount withheld for federal income tax. Federal taxes are necessary to keep the government agencies and services afloat. Employers are required by law to withhold a certain amount of your pay for federal income tax (or FIT). The Internal Revenue Service (IRS) provides employers with tables that show how much money to withhold. The amount withheld depends on your income, marital status, and withholding allowances. You may claim 1 allowance for yourself and 1 allowance for your spouse if you are married. You may claim additional allowances for any others you support. Warm Up: What do you do when your bills are more than your paycheck?

Adapted for Education purposes from Glencoe Mathematics with Business Applications. 2015

Example 1: Donna Smith's gross pay for this week is $425.88. She is married and claims 2 allowances? herself and her husband. What amount will be withheld from Donna's pay for FIT?

Step 1: Find the income range in the table. (It's 420-430.) Step 2: Find the column for 2 allowances.

The amount of income to be withheld is $15.

Example 2:

Some companies use a percentage method of the tax tables to compute the income tax withheld. Use the "Weekly Payroll Period ? Single Person" to find the amount withheld for the single employees below. Each weekly allowance is $61.54.

Example of Percentage Method: Daniel Taylor's weekly wage: $293.23 Number of allowances: 2

Step 1: Find the allowance amount.

Number of Allowances X $61.54

(2

X 61.54) = $123.08 Allowance Amount

Step 2: Find the taxable wages.

Weekly wage ? Allowance Amount

$293.23 -

23.08

= $170.15

Step 3: Find the amount withheld for the employees in the chart above.

$170.15 - $51 = $119.15

$119.15 X 10% = $11.92

Self Check Answers: 1. $18 2. $16

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