When a person gets a job and receives a paycheck from an employer deductions are subtracted to pay taxes. The amount of money a person initially receives is called gross pay. Taxes are calculated on this amount. The amount of money a person receives after the deductions are subtracted is called net pay.
1. Create a NEW document in Excel.
2. Insert your name in cell A1
3. In the second row second column create the bold column header titled Gross Income.
4. Under gross income enter $4000.00.
5. Next to the gross income column enter column header titled Deductions.
6. Under deductions enter in separate rows Federal Tax: 12%, State Tax: 3%, Local Tax: 1%, Social Security Tax: 6%, Medicare Tax: 6%.
7. Next to the Deductions column create a new header called Deduction Amount.
8. Under Deduction Amount calculate the proper amounts by multiplying Gross Income ($4000.00) by .12, .03, .01, .06, .06.
9. Under Medicare Tax enter Total Deductions and right align
10. Under Total Deductions enter NET PAY and right align.
11. Next to Total Deductions enter the formula that adds the tax amounts.
12. Next to NET PAY enter the formula that calculates the Net Pay by subtracting the Total Deductions amount from the Gross Pay.
Pay check example.