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Education Pensions in Illinois

Question: Accounting help! help appreciated!?

Karl works as a financial analyst for a salary of $2,700 per week. Prior to this pay period his cumulative earnings were $67,500. His federal income tax withholding is 15% of his gross pay. The FICA tax rate is 6.2% for Social Security and 1.45% for Medicare. Assume a maximum taxable earnings limit for Social Security of $100,000. Calculate his net pay for the week ending June 27, 2008.

calulate

1. What amount should you use as Chandra’s gross pay?

2. Calculate the amount of income tax to withhold

Answer: 1. What amount should you use as Chandra’s gross pay?

Gross pay is the $2,700 per week that Karl earns

2. Calculate the amount of income tax to withhold

Since Karl’s prior earnings ($67,500) plus his earnings for the current week ($2,700) equal to less than the FICA limit of $100,000, the full pay for the week is subject to the 6.2% FICA tax.

So the taxes withheld are:

Federal Tax – $2,700 X 15% = $405
FICA – $2,700 X 6.2% = $167.40
Medicare tax – $2,700 X 1.45% = $39.15

Total tax = ($405 + $167.40 + $39.15) $611.55

3. Calculate the Net Pay for the week.

Karl’s Net Pay is equal to ($2,700 – $611.55) $2,088.45

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