Solutions for Questions and Problems – Chapter 7 195

CHAPTER 9

WITHHOLDING, ESTIMATED PAYMENTS, AND PAYROLL TAXES

Group 1 - Multiple Choice Questions

1. D (LO 9.1) 8. C $43,000 x 0.9235 x 15.3% (LO 9.6)

2. D 5 regular and 1 special 9. D (LO 9.6)
(LO 9.1) 10. C (LO 9.7)
3. D (LO 9.1) 11. D (LO 9.8)
4. B (LO 9.2) 12. A (LO 9.8)
5. D (LO 9.3) 13. C (LO 9.8)
6. D (LO 9.4) 14. B ($400,000 – $200,000) x 0.9% (LO 9.9)
7. B (LO 9.5) 15. D Christine’s employer will have withheld on $50,000. (LO 9.9)

Group 2 - Problems

1. See Form W-4 on pages 197 and 198. (LO 9.1)

2. See Form W-4 on pages 199 and 200. (LO 9.1)

3. a. Allowance amount (monthly) $329.20

Number of allowances claimed x3
Total $987.60

Gross wages $3,250.00

Less: Amount from above – 987.60
Withholding base $2,262.40

Withholding from percentage tables in Appendix C = (($2,262.40 – $944.00) x 15%)

+ $75.60 = $273.36.

b. $275.00 (Appendix C). (LO 9.1)

4. The tip income may be allocated on the basis of gross receipts of each employee or on the basis
of the number of hours worked by each employee. Alternatively, the tip income may be allocated
using a good faith agreement between the employer and employees where the agreement meets
certain conditions. (LO 9.1)

195
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 Solutions for Questions and Problems – Chapter 7 196

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 Solutions for Questions and Problems – Chapter 7 202

13. See Form 4852 on pages 203 and 204. (LO 9.5)
14. See Schedule SE on pages 205 and 206. (LO 9.6)
15. a. $420 = 6.0% x $7,000 (maximum).
b. $378 = 5.4% x $7,000.
c. $42 = $420 – $378. (LO 9.7)
16. $250 x 10 = $2,500
a. $2,500 x 6.2% = $155.00
b. $2,500 x 1.45% = $36.25
c. ($2,500 x 6.2%) + ($2,500 x 1.45%) = $191.25 (LO 9.8)
17. a. $125 x 48 = $6,000
$6,000 x 6.2% = $372.00
$6,000 x 1.45% = 87.00
$459.00
b. $459 [($6,000 x 6.2%) + ($6,000 x 1.45%)], must be withheld from the nanny’s wages. (LO 9.8)
18. $810 = ([$350,000 – $10,000 – $250,000] x .9%) (LO 9.9)

Group 3 - Writing Assignment

A better way for Rocky to ensure a large refund would be for him to correctly fill out Form W-4 claiming
all of his personal allowances. He could then also state the additional amount that he wanted withheld
from each paycheck on Form W-4, line 6.

You should, however, encourage Rocky to think carefully about “lending” too much money to the
federal government interest free. It would be better if Rocky correctly filled out Form W-4 to ensure
the appropriate withholding amount (not too little and not too much). The additional amount withheld
could instead be put into an interest-bearing savings account since the federal government pays no
interest on refunds.

Group 4 - Comprehensive Problem

1. See pages 207 through 219.

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