Question

Lauren has gross pay of $765 and federal tax withholdings of $68. Determine Lauren's net pay if she has the additional items withheld: Social Security tax that is 6. 2% of her gross pay Medicare tax that is 1. 45% of her gross pay State tax that is 22% of her federal tax a. $691. 52 b. $666. 21 c. $636. 98 d. $623. 52.

Answer 1

The correct statement is that the net salary of Lauren will be $623.52 after the deductions of tax withholding against her gross pay of $765.

So, the correct option that matches the statement quoted above is D. Calculations regarding the deduction of tax withholding are shown below.

Calculation of net salary

Net salary of Lauren can be calculated by subtracting all the given deductions from gross pay available in the hands of Lauren.

The withholding of taxes of Lauren will be calculated as,

$\rm Security\ Tax= Gross\ Pay\ x\ rate\\\\\rm Security\ Tax= 765\ x\ 0.062\\\\\rm Security\ Tax= \ 47.43$

Calculating further,

$\rm Medicare\ Tax\ = Gross\ Pay\ x\ rate\\\\\rm Medicare\ Tax\ = 765\ x\ 0.0145\\\\\rm Medicare\ Tax\ = \ 11.09$

and

$\rm State\ Tax\ = Federal\ Tax\ x\ Rate \\\rm State\ Tax\ = 68\ x\ 0.22\\\\\rm State\ Tax\ = \ 14.96$

Now deducting the summation of tax withholding from the gross pay, we get net salary as,

$\rm Net\ Pay= Gross\ Pay- Tax\ Withholding\\\\\rm Net\ Pay= 765-(14.96+11.09+47.43+68)\\\\\rm Net\ Pay= \ 623.52$

So, net pay of Lauren will be $623.52 for such period.

Hence, the correct option is D that the net salary of Lauren will be $623.52 after the deductions of tax withholding against her gross pay of $765.

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