Accounting

Use the percentage method to compute the federal income taxes to withhold from the wages or salaries of each employee.

4–2A.

Eaton Enterprises uses the wage-bracket method to determine federal income tax withholding on its employees.  Find the amount to withhold from the wages paid each employee.

4–4A.

*Must use percentage method (Jim Singer ONLY)

Damerly Company wants to give a holiday bonus check of $250 to each employee.  Since it wants the check amount to be $250, it will need to gross up the amount of the bonus.  Calculate the withholding  taxes and gross amount of the bonus to be made to John Rolen if his cumulative earnings for the year are $46,910.  Besides, being subject to social security taxes and federal income tax (supplemental rate), a 7% California income tax must be withheld on supplemental payments.

4–6A.

(a)                                                                           $250         

      1 – 0.25 (supplemental federal rate) – 0.062 (OASDI) – 0.0145 (HI) – 0.07 (California tax) = ___________

(b)  $250/(1 – 0.3965) = __________

(c)  Gross bonus amount __________                    

      Federal income tax withheld __________         

      OASDI tax withheld ____________                  

      HI tax withheld ____________                         

      California income tax withheld ___________    

      Take-home bonus check __________                              

George Clausen (age 48) is employed by Kline Company and is paid a salary of $42,640.  He has just decided to join the company’s Simple Retirement Account (IRA form) and has a few questions.  Answer the following:

4–11A.

(a)   Clausen’s maximum contribution _____________                                    

(b)   Kline Company’s contribution (3%) _____________                                 

(c)   Clausen’s take-home pay with the

        retirement contribution deducted:

        Weekly pay.............................................................               $  820.00

        FICA—OASDI..............................................................            ______

        FICA—HI.....................................................................            ______

        FIT ($820.00 – $230.77 = $589.23 taxable)...............            _________*

        State income tax ($820.00 × 0.023)...........................            ______

        Retirement contribution ($12,000 ÷ 52)............   ....               _______

        Take-home pay.......................................................               _______

        *Married, 2 allowances.

(d)   Clausen’s take-home pay without the

        retirement contribution deducted:

        Weekly pay...........................................................                $820.00

        FICA—OASDI..........................................................            ______

        FICA—HI.................................................................            ______

        FIT (on $820.00)......................................................            ______

        State income tax ($820.00 × 0.023)........................            ______

        Take-home pay.......................................................            ______