Chloe receives her paycheck and knows that her gross pay and federal tax are correct. Using the fact that Social Security tax is $6.2\%$ of gross pay, Medicare tax is $1.45\%$ of gross pay and state tax is $23\%$ of federal tax, determine if Chloe's net pay is correct.
| | Earnings | Deductions |
| :---------- | :------- | :-------------------------------------------- |
| Week Ended | Regular | FED. WITH. | SOC. WITH. | MED CARE. | STATE WITH. |
| 9/10 | $856.00 | $80.00 | $53.07 | $12.41 | $18.40 |
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 × 856.00 = 53.07 .
Calculate Medicare tax: 0.0145 × 856.00 = 12.41 .
Calculate State tax: 0.23 × 80.00 = 18.40 .
Since all calculated taxes match the given values, the net pay is correct. The net pay is correct.
Explanation
Problem Analysis We need to determine if Chloe's net pay is correct. We are given her gross pay, federal tax, and the percentages for Social Security tax, Medicare tax, and state tax. We will calculate each of these taxes based on the given percentages and compare them to the values provided in the table.
Calculating Social Security Tax First, let's calculate the Social Security tax, which is 6.2% of the gross pay of 856.00. S o , w e ha v e : 0.062 × 856.00 = 53.072 $
This is approximately $53.07, which matches the value in the table.
Calculating Medicare Tax Next, let's calculate the Medicare tax, which is 1.45% of the gross pay of 856.00. S o , w e ha v e : 0.0145 × 856.00 = 12.412 $
This is approximately $12.41, which matches the value in the table.
Calculating State Tax Now, let's calculate the state tax, which is 23% of the federal tax of 80.00. S o , w e ha v e : 0.23 × 80.00 = 18.40 $
This matches the value in the table.
Conclusion Since the calculated Social Security tax, Medicare tax, and state tax all match the values provided in the table, the net pay is correct.
Examples
Understanding paycheck deductions is crucial for managing personal finances. For instance, knowing how taxes like Social Security, Medicare, and state income tax are calculated helps you anticipate your net pay and budget accordingly. This knowledge is also useful when evaluating job offers, as it allows you to compare the actual take-home pay from different positions. Furthermore, understanding these deductions can help you identify any errors in your paycheck, ensuring you are paid correctly.
Chloe's deductions for Social Security, Medicare, and state tax were calculated and confirmed to match the values given on her paycheck. All calculations are correct, indicating that Chloe's net pay is accurate. Therefore, the correct answer is option a: The net pay is correct.
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