Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise, calculate hourly rates and overtime rates as follows:

1.	Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimal places (round the hourly rate to 2 decimal places before multiplying by one and one-half to determine the overtime rate).
2.	If the third decimal place is 5 or more, round to the next higher cent.
3.	If the third decimal place is less than 5, simply drop the third decimal place.
	Examples:	Monthly rate $1,827 Weekly rate ($1,827 12)/52 = $421.615 rounded to $421.62 Hourly rate $421.62/40 = $10.540 rounded to $10.54 O.T. rate $10.54 1.5 = $15.81

Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow.

Example 4-3

To use the wage-bracket method, follow the steps illustrated below.

Step 1
Select the withholding table that applies to the employee's marital status and pay period.		Adrienne Huff is married and claims 3 allowances. She is paid weekly at a rate of $815.
Step 2
Locate the wage bracket (the first two columns of the table) in which the employee's gross wages fall.		Locate the appropriate wage bracket (see Figure 4.6):
		At least $815 but less than $825
Step 3
Follow the line for the wage bracket across to the right to the column showing the appropriate number of allowances. Withhold this amount of tax.		Move across the line to the column showing 3 allowances.
		The tax to withhold is $36.

Figure 1.9

The names of the employees of Hogan Thrift Shop are listed on the following payroll register. Employees are paid weekly. The marital status and the number of allowances claimed are shown on the payroll register, along with each employee's weekly salary, which has remained the same all year. Complete the payroll register for the payroll period ending December 20, the 51st weekly payday. The state income tax rate is 2% of total earnings, the city income tax rate is 1.5% of the total gross earnings, and the wage-bracket method is used for federal income taxes. Hint: If wages are higher than the last amount on the appropriate wage-bracket table, the percentage method must be used.

Enter all amounts as positive numbers. Round your calculations and final answers to the nearest cent.

Click here to access the Table of Allowance Values.

Click here to access the Wage-Bracket Method Tables.

Click here to access the Percentage Method Tables.

Hogan Thrift Shop Payroll Register
FOR PERIOD ENDING December 20, 20--					Deductions
Employee Name	Marital Status	No. of W/H Allowances	Total Earnings
					(a) FICA		(b)	(c)	(d)	(e)
					OASDI	HI	FIT	SIT	CIT	Net Pay
John, Matthew	M	3	$2,524.00		$	$	$	$	$	$
Smith, Jennifer	S	1	275.00
Bullen, Catherine	M	0	250.00
Matthews, Mary	S	3	320.25
Hadt, Bonnie	S	1	450.00
Camp, Sean	S	2	560.50
Wilson, Helen	S	1	475.50
Gleason, Josie	M	3	890.00
Totals			$5,745.25		$	$	$	$	$	$

Compute the employer's FICA taxes for the pay period ending December 20.

OASDI Taxes		HI Taxes
OASDI taxable earnings	$	HI taxable earnings	$
OASDI taxes	$	HI taxes	$

Feedback

a. Using OASDI and HI rates, calculate appropriate taxes considering OASDI ceiling! b. Calculate FIT using Wage Bracket method whenever possible; use Percentage Method if unable to use Wage Bracket method. c. Calculate State Income tax on total earnings using rate given. d. Calculate City Income tax on total earnings using rate given. e. Calculate net pay by subtracting deductions from total earnings. f. Calculate employer's FICA taxes for OASDI and HI using taxable earnings. Consider OASDI ceiling.