Use the following federal tax table for biweekly earnings of a single person to help answer the question below.
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|At least|But less than|0 |1 |2 |3 |4 |5 |6 |7 |9 |10+ |
|:-------|:------------|:---|:---|:---|:---|:---|:---|:---|:---|:---|:----|
|720 |740 |80 |62 |44 |26 |14 |1 |0 |0 |0 |0 |
|740 |760 |83 |65 |47 |28 |16 |3 |0 |0 |0 |0 |
|760 |780 |86 |68 |50 |31 |18 |5 |0 |0 |0 |0 |
|780 |800 |89 |71 |53 |34 |20 |7 |0 |0 |0 |0 |
|800 |820 |92 |74 |56 |37 |22 |9 |0 |0 |0 |0 |
|820 |840 |95 |77 |59 |40 |24 |11 |0 |0 |0 |0 |
|840 |860 |98 |80 |62 |43 |26 |13 |1 |0 |0 |0 |
Mario has gross biweekly earnings of $784.21. By claiming 1 more withholding allowance, Mario would have $13 more in his take home pay. How many withholding allowances does Mario currently claim?
A. 3
Answer (1)
Mario's biweekly earnings are $784.21 , so we use the row with earnings between $780 and $800 .
We test the differences in tax withheld for consecutive withholding allowances.
The tax withheld decreases by $13 when Mario claims one more allowance, going from 3 to 4 allowances.
Therefore, Mario currently claims 3 allowances.
Explanation
Understanding the Problem We are given that Mario's gross biweekly earnings are $784.21 . We need to use the provided tax table to determine how many withholding allowances Mario currently claims. We know that if Mario claims one more withholding allowance, his take-home pay would increase by $13 . This means the tax withheld would decrease by $13 .
Identifying the Correct Row First, we need to find the row in the tax table that corresponds to Mario's earnings. Since his earnings are $784.21 , we look for the row where 'At least' is less than or equal to 784.21 and 'But less than' is greater than 784.21. This corresponds to the row with 'At least 780' and 'But less than 800'.
Analyzing Tax Withholding Amounts Now, we examine the tax amounts withheld for different numbers of withholding allowances in that row. The amounts are 71, 53, 34, 20, 7, and 0 for 0, 1, 2, 3, 4, and 5 allowances, respectively.
Testing the Possibilities We are told that claiming one more allowance results in $13 more take-home pay, meaning the tax withheld decreases by $13 . Let's test the possibilities. If Mario currently claims 0 allowances, the tax withheld is $71 . If he claims 1 allowance, the tax withheld is $53 . The difference is 71 − 53 = 18 , which is not $13 . If Mario currently claims 1 allowance, the tax withheld is $53 . If he claims 2 allowances, the tax withheld is $34 . The difference is 53 − 34 = 19 , which is not $13 . If Mario currently claims 2 allowances, the tax withheld is $34 . If he claims 3 allowances, the tax withheld is $20 . The difference is 34 − 20 = 14 , which is not $13 . If Mario currently claims 3 allowances, the tax withheld is $20 . If he claims 4 allowances, the tax withheld is $7 . The difference is 20 − 7 = 13 . This matches the given information.
Conclusion Therefore, Mario currently claims 3 withholding allowances.
Examples
Tax tables are used to determine how much income tax to withhold from an employee's paycheck. Understanding how withholding allowances affect your take-home pay can help you plan your finances. For example, if you want to increase your take-home pay, you can claim more allowances, but this may result in a larger tax bill at the end of the year. Conversely, if you want to reduce your tax bill at the end of the year, you can claim fewer allowances, but this will reduce your take-home pay.
