Juanita receives her paycheck and knows that her gross pay and federal tax are correct. Security tax is $6.2 \%$ of gross pay, Medicare tax is $1.45 \%$ of gross pay and state tax is $19 \%$ of federal. Juanita's net pay is correct.
| | Earnings | | | | | |
| :---------- | :---------- | :---------------------------- | :--------- | :--------- | :--------- | :---------- |
| Week Ended | Regular | FED. WITH. | SOC. WITH. | MED CARE. | STATE WITH. | |
| 11/17 | $1,020.00 | $107.00 | $63.24 | $14.79 | $20.33 | |
Choose the true statement below.
a. The net pay is correct.
b. The Social Security tax is not correct.
c. The Medicare tax is not correct.
d. The state tax is not correct.
Answer (2)
Calculate Social Security tax: 0.062 × 1020.00 = 63.24 .
Calculate Medicare tax: 0.0145 × 1020.00 = 14.79 .
Calculate State tax: 0.19 × 107.00 = 20.33 .
Since all calculated taxes match the withheld amounts, the net pay is correct: The net pay is correct.
Explanation
Analyzing the Paycheck Deductions Let's analyze Juanita's paycheck to determine if the deductions are correct. We'll calculate the expected amounts for Social Security tax, Medicare tax, and state tax based on the given percentages and compare them to the amounts withheld.
Calculating Social Security Tax First, we calculate the Social Security tax, which is 6.2% of the gross pay of 1020.00. S o , w e ha v e : 0.062 × 1020.00 = 63.24 $
The Social Security tax withheld is $63.24, which matches our calculation. Therefore, the Social Security tax is correct.
Calculating Medicare Tax Next, we calculate the Medicare tax, which is 1.45% of the gross pay of 1020.00. S o , w e ha v e : 0.0145 × 1020.00 = 14.79 $
The Medicare tax withheld is $14.79, which matches our calculation. Therefore, the Medicare tax is correct.
Calculating State Tax Now, we calculate the state tax, which is 19% of the federal tax of 107.00. S o , w e ha v e : 0.19 × 107.00 = 20.33 $
The state tax withheld is $20.33, which matches our calculation. Therefore, the state tax is correct.
Determining the Correct Statement Since the Social Security tax, Medicare tax, and state tax are all correct, the statement that the net pay is correct must be true.
Final Answer Therefore, the true statement is that the net pay is correct.
Examples
Understanding paycheck deductions is crucial for financial literacy. For instance, knowing how Social Security, Medicare, and state taxes are calculated helps you verify the accuracy of your paycheck and plan your budget effectively. This knowledge is also useful when evaluating job offers, as it allows you to compare the actual take-home pay from different positions. Additionally, understanding these deductions is essential for filing taxes correctly and avoiding potential issues with tax authorities.
All calculations for Juanita's paycheck deductions—Social Security tax, Medicare tax, and state tax—match the withheld amounts, leading to the conclusion that her net pay is correct. Therefore, the true statement is option a: The net pay is correct.
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