Question

The deductions from Richard Black's monthly pay are federal income tax of $112, state income tax of 2.5%, city income tax of 1.5% of gross, Social Security, and Medicare. His monthly net pay is $3,825.16. Find Richard's monthly gross pay.

$4,621.32
	$4,456.32
	$4,342.00
	$4,329.55

Answer 1

Answer :- Option B). $ 4,456.32

Explanation :- Let Gross pay be denoted by "G".

Gross pay - deductions = Net pay.

G - (Federal income tax + State income tax + City income tax + Social security & medicare) = Net pay.

G - (112 + 0.025 G + 0.015 G + 0.0765 G) = 3825.16

G - (0.1165 G + 112) = 3825.16

0.8835 G - 112 = 3825.16

G = (3825.16 + 112) / 0.8835

G = 3937.16 / 0.8835

G (Gross pay) = $ 4,456.32 (approx).

Conclusion :- Gross pay (G) = $ 4,456.32 (Option B)

Note:- i). State income tax, City income tax, Social security & medicare are all calculated on the gross pay only.

ii). Socital security & medicare tax rate is cumulatively known as FICA Tax. The rate of FICA tax is 7.65 %. Accordingly. 7.65 % of gross pay (representing social & medicare tax) is deducted from total gross pay.