Example 4-2

To compute the tax using the percentage method for Manual Payroll Systems with Forms W-4 from 2020 or Later using Standard Withholding Rate Schedules, follow the steps illustrated below.

Step 1Determine the amount of gross wages earned, filing status, adjustments on Form W-4, and frequency of pay. Note: If the wage ends in a fractional dollar amount, the wage may be rounded to the nearest dollar. However, in this text, exact wages are used.Wilson Goodman, single(S), has no adjustments on his Form W-4 and earns $915.60 semimonthly.

Step 2

Determine the withholding tax by referring to the appropriate Percentage Method Withholding Table (see Figure 4.6 below).Compute tax from Tax Table A, Semimonthly, Standard Withholding Rate Schedule, page T-3.

($915.60 - $517.00 = $398.60 10% = $39.86 + $0) = $39.86

Example 4-3

To use the wage-bracket method for Manual Payroll Systems With Forms W-4 From 2020 or Later using Standard Withholding, follow the steps illustrated below.

Step 1Select the withholding table that applies to the employee's pay period.Adrienne Huff is married filing jointly (MFJ). She is paid weekly at a rate of $815.Step 2Locate 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 4.7):At least $810 but less than $820Step 3Follow the line for the wage bracket across to the right to the column showing the appropriate filing status with standard withholding. Withhold this amount of tax.Move across the line to the column showing Married Filing Jointly, Standard withholding.The tax to withhold is $34.

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.

As we go to press, the federal income tax rates for 2021 are being determined by budget talks in Washington and not available for publication. For this edition, the 2020 federal income tax tables for Manual Systems with Forms W-4 from 2020 or later with Standard Withholding and 2020 FICA rates have been used.

Click here to access the Percentage Method Tables.

Click here to access the Wage-Bracket Method Tables.

Amount to Be

Withheld

Employee

Filing

StatusNo. of Withholding

Allowances

Gross Wage

or Salary

Percentage

Method

Wage-Bracket

MethodLennon, A.HHN/A$675weekly$fill in the blank 1

$fill in the blank 2

Starr, P.SN/A1,929weeklyfill in the blank 3

fill in the blank 4

McNeil, S.SN/A1,775biweeklyfill in the blank 5

fill in the blank 6

Harrison, W.SN/A2,580semimonthlyfill in the blank 7

fill in the blank 8

Smythe, M.SN/A5,380monthlyfill in the blank 9

fill in the blank 10

Feedback

a.Use Percentage Method Tables to calculate federal income taxes withheld using filing status.

b.Use Wage-Bracket Tables. At this point check your work by comparing parts a & b; these amounts should be very similar.