Bonnie claims single with 2 federal withholding allowances, and contributes state tax of 20% of her federal tax. Below is a copy of Bonnie's biweekly statement of earnings. Bonnie knows that her gross earnings and federal tax are correct, but she thinks that her net pay is not correct.

 	
Earnings
Deductions
 
Week Ended
   Regular    
FED.         SOC.        MED          STATE
WITH.        WITH.       CARE.        WITH.
NET PAY
4/15
$760.00 
$50.00      $47.12     $110.20      $10.00
$542.68

Using the fact that Social Security is 6.2% and Medicare is 1.45% of gross pay, explain why the given net pay is not correct. Determine how the error can be corrected, and what the net pay should be.
 

To analyze Bonnie's biweekly statement of earnings and verify her net pay, let's break it down step by step. We will calculate each deduction based on the given percentages and compare the results with the deductions listed on the statement.

### Step 1: Given Data
- **Gross pay**: \$760.00
- **Federal tax (withholding)**: \$50.00
- **Social Security tax**: \$47.12
- **Medicare tax**: \$110.20 (this seems unusually high, so we will check this)
- **State tax withholding**: \$10.00
- **Net pay**: \$542.68 (we will check if this is correct)

### Step 2: Social Security and Medicare Calculations
- **Social Security tax** is **6.2%** of gross pay:
  \[
  \text{Social Security tax} = 760.00 \times 0.062 = 47.12
  \]
  This matches the statement, so Social Security tax is correct.

- **Medicare tax** is **1.45%** of gross pay:
  \[
  \text{Medicare tax} = 760.00 \times 0.0145 = 11.02
  \]
  The Medicare tax listed on the statement is \$110.20, which is **incorrect**. The correct amount should be \$11.02.

### Step 3: State Tax Calculation
Bonnie contributes **20% of her federal tax** to state tax. Since the federal tax is \$50.00:
\[
\text{State tax} = 50.00 \times 0.20 = 10.00
\]
This matches the state tax listed, so the state withholding is correct.

### Step 4: Recalculating Total Deductions
Now let's sum the deductions with the corrected Medicare tax:
- **Federal tax**: \$50.00
- **Social Security tax**: \$47.12
- **Medicare tax**: \$11.02 (corrected value)
- **State tax**: \$10.00

The total deductions are:
\[
\text{Total deductions} = 50.00 + 47.12 + 11.02 + 10.00 = 118.14
\]

### Step 5: Calculating Correct Net Pay
To find the correct net pay, subtract the total deductions from the gross pay:
\[
\text{Net pay} = 760.00 - 118.14 = 641.86
\]

### Conclusion: Error in Net Pay
Bonnie's statement shows a net pay of \$542.68, but after correcting the Medicare tax, the correct net pay should be **\$641.86**. The error can be attributed to the incorrectly listed Medicare tax, which was \$110.20 instead of the correct value of \$11.02.

### Correction
Bonnie's net pay should be corrected to **\$641.86**, an increase of:
\[
641.86 - 542.68 = 99.18
\]

### Do you want details or have any questions?

---

Here are five follow-up questions:
1. How would the calculation change if Bonnie's gross pay were higher?
2. What if her federal withholding allowance changed—how would that affect the state tax?
3. How are Social Security and Medicare taxes used by the government?
4. What are the implications of incorrect tax deductions in the long run?
5. Could Bonnie's filing status affect her federal tax withholding amounts?

**Tip**: Always review pay stubs carefully to catch potential errors in tax calculations, especially when percentages and fixed amounts are involved.

Bonnie claims single with 2 federal withholding allowances, and contributes state tax of 20% of her federal tax. Below is a copy of Bonnie's biweekly statement of earnings. Bonnie knows that her gross earnings and federal tax are correct, but she thinks that her net pay is not correct.
 
Earnings
Deductions
 
Week Ended
   Regular 
FED.         SOC.        MED          STATE
WITH.        WITH.       CARE.        WITH.
NET PAY
4/15
$760.00 
$50.00      $47.12     $110.20      $10.00
$542.68

Using the fact that Social Security is 6.2% and Medicare is 1.45% of gross pay, explain why the given net pay is not correct. Determine how the error can be corrected, and what the net pay should be.

Learn how to analyze and correct payroll deductions for federal, Social Security, Medicare, and state tax. This example uses Bonnie's biweekly pay statement to demonstrate how incorrect Medicare tax affects her net pay. Step-by-step breakdown suitable for high school students (Grades 9-12).

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