Andie earned $680.20 during the most recent weekly pay period. She is single with 3 withholding allowances and needs to decide between contributing 2.5% and $25 to her 401(k) plan. If she chooses the method that results in the lowest taxable income, how much will be withheld for Federal income tax (based on
The following table)?
Wage Bracket Method Tables for Income Tax Withholding
SINGLE Persons-WEEKLY Payroll Period
(For Wages Paid through December 2019)
And the wages are And the number of withholding allowances claimed is-
At least But lessthan 0 1 2 3 4 5 6 7 8 9 10
The amount of income tax to be withheld is-

A) $40.00
B) $48.00
C) $36.00
D) $39.00

Question

Andie earned $680.20 during the most recent weekly pay period. She is single with 3 withholding allowances and needs to decide between contributing 2.5% and $25 to her 401(k) plan. If she chooses the method that results in the lowest taxable income, how much will be withheld for Federal income tax (based on
The following table)?
Wage Bracket Method Tables for Income Tax Withholding
SINGLE Persons-WEEKLY Payroll Period
(For Wages Paid through December 2019)
And the wages are And the number of withholding allowances claimed is-
At least But lessthan 0 1 2 3 4 5 6 7 8 9 10
The amount of income tax to be withheld is-

A) $40.00 
B) $48.00 
C) $36.00 
D) $39.00

Quizplus · Accepted Answer

To determine the best choice, we need to calculate the taxable income for both options and see which results in a lower amount of income tax to be withheld.

Option 1: Contributing 2.5% to her 401(k)
2.5% of $680.20 = $17.01
Taxable income = $680.20 - $17.01 = $663.19

Option 2: Contributing $25 to her 401(k)
Taxable income = $680.20 - $25 = $655.20

Using the wage bracket method table for single persons, we look for the row that matches Andie's taxable income and the column that matches her number of withholding allowances (3). The amount of income tax to be withheld is $36.00.

Therefore, the best choice is to contribute $25 to her 401(k) plan, resulting in a taxable income of $655.20 and income tax to be withheld of $36.00. (Option 2: C)

Andie Earned $680