Ava and her husband, Leo, file a joint return and are in the 24% Federal income tax bracket in 2020. Ava's salary is $102,050. Her employer offers a child and dependent care reimbursement plan that allows up to $4,750 of qualifying expenses to be reimbursed in exchange for a $4,750 reduction in the employee's salary. Because Ava and Leo have two minor children requiring child care that costs $5,225 each year, Ava is wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent care expenses. Analyze the effect of the two alternatives. Assume a FICA tax rate of 7.65%. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Click to view Percentage Credit based on Adjusted Gross Income. a. If Ava and Leo take advantage of the plan, they would save income taxes because the reimbursement of child care expenses is excluded from v gross income. The income tax savings Ev associated with participating in the plan would be 1,140 v. In addition, Ava will save $ 363 v of FICA taxes due to the reduction in salary. 1,045 v. Therefore Alternatively, if Ava does not take advantage of the plan, their child and dependent care tax credit will be $ 95 v higher Ava and Leo's income taxes will be s v if they do not participate in the plan. Feedback Check My Work b. Assume, instead, that Ava's salary was $30,000 and Ava and Leo's AGI is $24,750 and they are in the 10% tax bracket. The income tax savings associated with participating in the plan would be s 475 v. In addition, Ava will save 363 v of FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent care tax credit will be $ 1,568 v. Therefore Ava and Leo's income taxes will be $ 962 x lower v if they do not participate in the plan.
Ava and her husband, Leo, file a joint return and are in the 24% Federal income tax bracket in 2020. Ava's salary is $102,050. Her employer offers a child and dependent care reimbursement plan that allows up to $4,750 of qualifying expenses to be reimbursed in exchange for a $4,750 reduction in the employee's salary. Because Ava and Leo have two minor children requiring child care that costs $5,225 each year, Ava is wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent care expenses. Analyze the effect of the two alternatives. Assume a FICA tax rate of 7.65%. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Click to view Percentage Credit based on Adjusted Gross Income. a. If Ava and Leo take advantage of the plan, they would save income taxes because the reimbursement of child care expenses is excluded from v gross income. The income tax savings Ev associated with participating in the plan would be 1,140 v. In addition, Ava will save $ 363 v of FICA taxes due to the reduction in salary. 1,045 v. Therefore Alternatively, if Ava does not take advantage of the plan, their child and dependent care tax credit will be $ 95 v higher Ava and Leo's income taxes will be s v if they do not participate in the plan. Feedback Check My Work b. Assume, instead, that Ava's salary was $30,000 and Ava and Leo's AGI is $24,750 and they are in the 10% tax bracket. The income tax savings associated with participating in the plan would be s 475 v. In addition, Ava will save 363 v of FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent care tax credit will be $ 1,568 v. Therefore Ava and Leo's income taxes will be $ 962 x lower v if they do not participate in the plan.
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 9DQ: LO.2 Osprey Corporation, an accrual basis taxpayer, had taxable income for 2019 and paid 40,000 on...
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Transcribed Image Text:Discussion Question 12-5 (Algorithmic) (LO. 4, 7)
Ava and her husband, Leo, file a joint return and are in the 24% Federal income tax bracket in 2020. Ava's salary is $102,050. Her
employer offers a child and dependent care reimbursement plan that allows up to $4,750 of qualifying expenses to be reimbursed in
exchange for a $4,750 reduction in the employee's salary. Because Ava and Leo have two minor children requiring child care that costs
$5,225 each year, Ava is wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent
care expenses. Analyze the effect of the two alternatives. Assume a FICA tax rate of 7.65%.
Do not round intermediate computations. If required, round your final answers to the nearest dollar.
Click to view Percentage Credit based on Adjusted Gross Income.
a. If Ava and Leo take advantage of the plan, they would
is excluded from
а.
save income taxes because the reimbursement of child
are expenses
v gross income. The income tax savings
v associated with participating in the plan would be
1,140 v. In addition, Ava will save $
363 v of FICA taxes due to the reduction in salary.
Alternatively, if Ava does not take advantage of the plan, their child and dependent care tax credit will be $
1,045 v. Therefore
Ava and Leo's income taxes will be $
95 v higher
if they do not participate in the plan.
Feedback
Check My Work
b. Assume, instead, that Ava's salary was $30,000 and Ava and Leo's AGI is $24,750 and they are in the 10% tax bracket.
The income tax savings
associated with participating in the plan would be $
475 v. In addition, Ava will save
363 v of FICA taxes due to the reduction in salary.
Alternatively, if Ava does not take advantage of the plan, their child and dependent care tax credit will be $
1,568 V. Therefore
Ava and Leo's income taxes will be $
962 x lower
v if they do not participate in the plan.
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