Example 4-2

To compute the tax using the percentage method, follow the steps illustrated below.

Step 1

Determine the amount of gross wages earned, marital status, number of allowances, 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, claims two allowances and earns $915.60 semimonthly.

Step 2

Multiply the number of allowances claimed by the amount of one allowance for the appropriate payroll period, as shown in the Table of Allowance Values in Figure 4.6.

Table of Allowance Values for semimonthly payroll period shows $175.00.

Multiply $175.00 2 = $350.00

Step 3

Subtract the amount for the number of allowances claimed from the employees gross pay to find the excess of wages over allowances claimed.

Gross pay	$915.60
Less: Allowances	350.00
Excess wages	$565.60

Step 4

Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table.

Compute tax from Tax Table 3(a), page T-3. ($565.60 $563.00 = $2.60 12% = $0.31 + $40.50) = $40.81

Use the percentage method to compute the federal income taxes to withhold from the wages or salaries of each employee. If an amount is zero, enter "0". If required, round your calculations and final answers to the nearest cent.

Click here to access the Table of Allowance Values.

Click here to access the Percentage Method Tables.

Employee No.	Employee Name	Marital Status	No. of Withholding Allowances	Gross Wage or Salary		Amount to Be Withheld
1	Amoroso, A.	M	4	$1,610	weekly	$fill in the blank 1
2	Finley, R.	S	0	825	biweekly	fill in the blank 2
3	Gluck, E.	S	5	9,630	quarterly	fill in the blank 3
4	Quinn, S.	M	8	925	semimonthly	fill in the blank 4
5	Treave, Y.	M	3	2,875	monthly	fill in the blank 5