Question

Use (a) the percentage method and (b) the wage-bracket method to compute the federal income taxes to withhold from the wages or salaries of each employee. Enter all amounts as positive numbers. Round your calculations and final answers to the nearest cent.

Table of Allowance Values for 2019 Weekly 80.80 Biweekly 161.50 Semimonthly 175.00 Monthly 350.00 Quarterly 1,050.00 Semiannual 2,100.00 Annual 4,200.00 Daily/Misc. 16.20

				Amount to Be Withheld
Employee	Marital Status	No. of Withholding Allowances	Gross Wage or Salary	Percentage Method	Wage-Bracket Method
Corn, A.	S	1	$675 weekly	$	$
Fogge, P.	M	4	1,960 weekly		Must use percentage method
Felps, S.	S	7	1,775 biweekly
Carson, W.	M	3	2,580 semimonthly
Helm, M.	M	7	5,380 monthly		Must use percentage method

Answer 1

We will have to use IRS publication 51 for 2019 to calculate the withholding tax.

Percentage Method -

IRS provides a table which has income slabs of wages subject to withholding, using which the percentage of withholding tax is calculated. This method works for any number of withholding allowances the employee claims and any amount of wages. You just need to figure out the Marital status i.e. single or married and the frequency within which the employee receive his/her wages i.e. weekle, bi-weekly etc.   

The following steps need to be taken to arrive at the Amount of wages subject to witholding tax -

1. Multiply one withholding allowance by the number of allowances claimed by the employee.

2. Subtract that amount from the employee's taxable wages.

3. Determine the amount to withhold from the IRS table as provided in its yearly publication (IRS publication 51)

Wage Bracket Method -

This is a rather simple method, where you just need to figure out the total wage the employee is making, the period of service in which they are making that wage, their marital status and the number of allowance they are claiming. Go to the correct IRS table based on all these information and calculate the withholding tax amount from there. If the amount of wage the employee is earning is higher than the last slab as per the IRS table, then withholding tax can only be calculated as percentage method. Like the same has been mention for two employees in the question above.

Based on all the information as provided in the question and using the IRS table Ihave calculated the withholding tax.

I have also Provided the formulae used for calculating the witholding tax as per percentage method in Column H

Employee Name (A)	Marital Status (B)	No. of Withholding Allowances ( C)	Wage Period	Gross Wage or Salary (D)	Amount of Deductible Allowance (E)	Total Amount of Allowance claimed in W-4                              (F = C*E)	Amount Subject to Withholding            (G = D-F)	Calculation of Withholding as per Percentage Method (H)	Percentage Method	Wage-Bracket Method	Notes
Corn, A.	S	1	Weekly	$                      675.00	$                                                 80.80	$                                 80.80	$                      594.20	$18.7+(12%*($594.20-$260))	$                      58.80	$                      59.00
Fogge, P.	M	4	Weekly	$                   1,960.00	$                                                 80.80	$                               323.20	$                  1,636.80	$37.3+(12%*($1636.80-$600))	$                    161.72	$                    161.72	As the wages exceed the maximum amount of wage on which wage bracket method can be used thus percentage method will ony have to be used
Felps, S.	S	7	Bi-weekly	$                   1,775.00	$                                               161.50	$                           1,130.50	$                      644.50	$37.3+(12%*($644.50-$519))	$                      52.36	$                      53.00
Carson, W.	M	3	Semi-monthly	$                   2,580.00	$                                               175.00	$                               525.00	$                  2,055.00	$80.8+(12%*($2055-$1300))	$                    171.40	$                    170.00
Helm, M.	M	7	Monthly	$                   5,380.00	$                                               350.00	$                           2,450.00	$                  2,930.00	$161.7+(12%*($2930-$2700))	$                    189.30	$                    189.30	As the wages exceed the maximum amount of wage on which wage bracket method can be used thus percentage method will ony have to be used