To determine the impact on the amount of federal income tax withheld under different scenarios involving changes in gross pay and withholding allowances, we need to consider two specific cases:
1. Case when gross pay stays the same, and withholding allowances increase:
We can observe the pattern in the data provided in the table. As the number of withholding allowances claimed increases for a specific wage range, the federal income tax withheld decreases. For example:
- For wages not less than 760 and less than 780, the tax withheld decreases as the number of withholding allowances increases:
- 0 allowances: \[tex]$86
- 1 allowance: \$[/tex]68
- 2 allowances: \[tex]$50
- 3 allowances: \$[/tex]31
Thus, if the wages remain unchanged and the number of withholding allowances increases, the amount of federal income tax withheld will decrease.
2. Case when gross pay increases by more than \[tex]$20 and withholding allowances stay the same:
We also notice that as the gross pay increases while withholding allowances stay the same, the federal income tax withheld increases. For instance:
- For 0 allowances:
- For wages not less than 760 and less than 780: \$[/tex]86
- For wages not less than 780 and less than 800: \[tex]$89
Similarly,
- For 3 allowances:
- For wages not less than 760 and less than 780: \$[/tex]31
- For wages not less than 780 and less than 800: \[tex]$34
Therefore, if the gross pay increases by more than \$[/tex]20 while the number of withholding allowances remains constant, the amount of federal income tax withheld will increase.
Based on these observations:
- Result a: If the gross pay stays the same and withholding allowances increase, the amount of federal income tax withheld will decrease.
- Result b: If the gross pay increases by more than \$20 and withholding allowances stay the same, the amount of federal income tax withheld will increase.
