Using the 2017 percentage method withholding tables, calculate the employee's withheld federal income tax based on the data: Weekly pay frequency; Vacation earnings: $360.62; Regular compensation: $239.38; 401(k) pre-tax deferral: $48.50; Married, 0 allowances

• A. $39.88
• B. $21.85
• C. $67.13
• D. $47.15

Answer: (A)

The key idea here is using the 2017 percentage method to determine federal income tax withholding for a weekly payroll. You first combine all earnings that are subject to tax, then subtract any pre-tax deductions, and finally apply the appropriate withholding rate from the weekly table based on filing status and allowances.

Start with the earnings: Vacation earnings of 360.62 plus regular compensation of 239.38 give total wages of 600.00. The 401(k) pre-tax deferral of 48.50 reduces the amount subject to federal income tax, so taxable wages become 600.00 − 48.50 = 551.50.

With zero withholding allowances, there’s no further subtraction for allowances. Now you use the weekly withholding table for the 2017 rate method for a married filer with 0 allowances and find the tax on 551.50. That lookup yields 39.88, which is the amount to withhold for federal income tax.

So, the process is: sum wages, subtract pre-tax deferrals, account for allowances (zero in this case), then apply the weekly rate table to the remaining amount, which matches 39.88.