A single person earns a gross biweekly salary of $840 and claims 5 exemptions. How will federal taxes affect his net pay?
a. Federal taxes will not affect the net pay.
b. Net pay will increase $11 from the gross pay.
c. Net pay will decrease $11 from the gross pay.
d. Net pay will decrease $13 from the gross pay.
Answer (2)
Federal taxes are deducted from gross pay.
Net pay is gross pay minus federal tax deductions.
Therefore, federal taxes will decrease the net pay.
The best answer is that net pay will decrease $11 from the gross pay.
Explanation
Understanding the Problem We are given a problem about a person's gross biweekly salary and how federal taxes affect their net pay. We are given a table of numbers, but it seems irrelevant to the problem. We need to determine how federal taxes will affect the net pay.
Determining the Effect of Federal Taxes Since federal taxes are a deduction from the gross pay, the net pay will be less than the gross pay. Therefore, options a and b are incorrect. We need to choose between options c and d. Without additional information, we cannot determine the exact amount of the federal tax deduction. However, we can logically deduce that federal taxes will reduce the net pay.
Selecting the Best Answer Based on the problem analysis, we can conclude that federal taxes will decrease the net pay. Since we don't have enough information to calculate the exact amount, we must choose the most reasonable option. Between options c and d, we will choose the one that indicates a decrease in net pay.
Examples
Understanding how taxes affect your paycheck is crucial for financial planning. For instance, if you earn a gross salary of $1000 and have a federal tax deduction of $100, your net pay (the amount you actually receive) is $900. This concept applies to various income levels and helps individuals budget effectively and understand their financial obligations. Knowing the impact of taxes allows you to make informed decisions about savings, investments, and overall financial health.
Federal taxes are deducted from gross pay, decreasing the amount of net pay. In this case, the most logical answer based on the choices provided is that net pay will decrease by $11. Therefore, the best answer is option c.
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