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 Wilson Goodman, single, claims two allowances and earns ends in a fractional dollar amount, the wage may be rounded to the $915.60 semimonthly. nearest dollar. However, in this text, exact wages are used. 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 x 2 = $350.00 Step 3 Gross pay $915.60 Subtract the amount for the number of allowances claimed from the employee's gross pay to find the excess of wages over allowances claimed. Less: Allowances 350.00 Excess wages $565.60 Step 4 Compute tax from Tax Table 3(a), page T-3. Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table. ($565.60 - $563.00 = $2.60 x 12% = $0.31 + $40.50) = $40.81 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 4.7): At least $810 but less than $821 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 $35. 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. Amount to Be Withheld Marital Status No. of Withholding Allowances Percentage Method Wage-Bracket Method Employee Corn, A. S 2 Gross Wage or Salary $675 weekly 1,960 weekly 1,775 biweekly Fogge, P. S 1 0 Felps, S. M 6 11 Carson, W. M 4 2,480 semimonthly Helm, M. M 9 5,380 monthly 0