EXAMPLE CALCULATING AN EMPLOYEE'S NET INCOME WITH DEDUCTIONS 1. Determine gross wages by taking their annual salary and dividing by the number of pay periods ( $48,00024 pay periods =$2.000 per pay period). Or when the employee (s nonexempt, toke this one step further to determine the hourly rote ($48,000(52 weeks 40 hours perweek)) =$2307692 per hour 2 Multiply hourly rote by the number of regular hours worked for hourly employees. 80 fours $23.07692=$1,846.15 in regular wages. 3. Multiply any overtime worked by the overtime rate 3 hours $23.07692,5=$10385 in overtme woges. 4. Total wages earned: $1,846.15103.85=$1,950,00 5. Determine federal and state taxable wages: $1950 - 50 (insurance) -58.50 (3\% of gross for 401(k) plan deduction) \$1,841.50. 6. Determine FICA taxable wages: $1,95050 insurance =$1,900,00 7 Find the federal toxes in the oppropriate tox toble in ARpendix. 8. Muitiply the FICA taxable wages by the Sociol Security rate (6.2%) 9. Multiply the FICA toxable wages by the Medicare rate (1.45\%). 10. Multiply the federal taxable wages by the state tax rate. 11. Subtract all deductions from gross wages to obtain net income