To determine: The extent of income tax saved by R by participating in the program with $3,000 this year along with if R was in the 25 % federal marginal tax bracket.
Introduction:
Employment decisions:Smart decisions about employee benefits can increase actual income 30 percent or more. Such decisions help recognize regular investments to get long-term maximum earnings. An employee benefit is the general term for the indirect benefits one receives at work that are concerned with such things other than compensation for employment it includes benefits like paid vacations sick days, health insurance, a retirement plan, child care, parental leave, and an educational assistance program. While some benefits are free others will cost some money, but they also will save money.
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Chapter 1 Solutions
EBK PERSONAL FINANCE TAX UPDATE
- Jangyoun is a married taxpayer with a dependant 4-year-old daughter. His employer offers a flexible spending account under which he can choose to receive cash or, alternatively, choose from certain fringe benefits. These benefits include health insurance that costs $9,000 and child care that costs $2,600. Assume Jangyoun is in the 28% tax bracket. A) How much income tax will Jangyoun save if he chooses to participate in the employer's health insurance plan? Assume that he does not have sufficient medical expenses to itemize his deductions. B) would you recommend that Jangyoun participate in the employer's health insurance plan if his wife's employer already provides comparable health insurance coverage for the family? C) Would you recommend that Jangyoun participate in the employer-provided child care option if he has the alternative option of claiming a child care credit of $480?arrow_forwardSteven takes a full-time position that pays an hourly wage of $32. The job assumes that he will work five 8-hour days a week. The government takes out 6.2% for Social Security, 1.45% for Medicare, and 15% for Federal income tax. Steven will have $80 taken out for health insurance and 6% of his after-tax monthly income taken out for retirement. GAI _________________ GMI _________________ ATM _________________ Total Expenses ________________ Net __________________arrow_forwardSteve is the librarian in his city's library. The library provides group disability insurance where premiums are paid by employees with after-tax dollars. He enrolls in a policy through the employer that provides a benefit of $4,200 a month. If he is in the 25% tax bracket and is disabled, what are his benefits after tax? A) $0. B) $1,050. C) $3,150. D) $4,200.arrow_forward
- JDD Corporation provides the following benefits to its employee, Ahmed (age 48): Description Salary Health insurance Dental insurance Life insurance Dependent care Professional dues Personal use of company jet Amount $ 344,000 13,700 4,200 3,600 4,400 520 227,000 The life insurance is a group-term life insurance policy that provides $273,000 of coverage for Ahmed. Assuming Ahmed is subject to a marginal tax rate of 32 percent, what is his after-tax benefit of receiving each of these benefits? (Use EXHIBIT 12-8.) Note: Enter all amounts as positive values. Round your intermediate computations and final answers to the nearest whole dollar. Description Taxable benefits Amount Salary Personal use of company jet Life insurance (taxable portion) $ 344,000 227,000 Taxable total Marginal tax rate Income tax on benefits After-tax benefit of taxable items Nontaxable benefits $ 571,000 32 %arrow_forwardJen Miller made $1,090 this week. Only social security (fully taxable) and federal income taxes attach to her pay. Miller contributes $125 each week to her company's 401(k) plan and has $40 put into her health savings account (nonqualified) each week. Her employer matches this $40 each week. Determine Miller's take-home pay if she is married and claims 2 allowances (use the wage-bracket method). What is her OASDI Tax? Her HI Tax?arrow_forwardWilbur has been offered a job at a salary that would put him in the 24% marginal tax bracket. In addition to his salary, he would receive health insurance coverage. Another potential employer does not offer health insurance but has agreed to match the first offer on an after-tax and insurance basis. The cost of health insurance comparable to that provided by the other potential employer is $9,000 per year. Round your answer to the nearest dollar. Wilbur will not be able to deduct the insurance as a medical expense because of the adjusted gross income floor and/or the standard deduction. How much more in salary must the second potential employer pay so that Wilbur's financial status will be the same under both offers?$fill in the blank 1arrow_forward
- Rosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $2,000 to $3,000. Her employer's plan permits her to set aside as much as $2,750 in the flexible benefits account. Rosa does not itemize her deductions. a. Rosa puts $1,750 into her flexible benefits account, and her actual expenses are $2,750. What is her cost of underestimating the expenses? b. Rosa puts $2,750 into her flexible benefits account, and her actual expenses are only $1,750. What is her cost of overestimating her expenses? (Assume this is a "use or lose" plan). %24 %24arrow_forwardLinda Calloway and Meredith Perdue are neighbors in Charleston. Linda works as a software engineer for Progressive Apps Corporation, while Sherry works as an executive for Industrial Container Company. Both are married, have two children, and are well paid. Linda and Meredith are interested in better understanding their pension and retirement plans. Progressive Apps Corporation, the company where Linda works, has a contributory plan in which 5 percent of the employees’ annual wages is deducted to meet the cost of the benefits. The firm contributes an amount equal to the employee contribution. The plan uses a five-year graded vesting procedure; it has a normal retirement age of 60 for all employees, and the benefits at retirement are paid according to a defined contribution plan. Industrial container, where Sherry works, has a minimum retirement age of 60. Employees (fulltime, hourly, or salaried) must meet participation requirements. Further, in contrast to the Progressive Apps plan,…arrow_forwardNicole's employer, Poe Corporation, provides her with an automobile allowance of $30,000 every other year. Her marginal tax rate is 32 percent. Answer the following questions relating to this fringe benefit. Required: What is Nicole's after-tax benefit if she receives the allowance this year? What is Poe's after-tax cost of providing the auto allowance? Plz don't copy answer plz help i give up votearrow_forward
- Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,200 annually. What is her employee's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 21 percent and is profitable?arrow_forwardLina, a single taxpayer with a 35 percent marginal tax rate, desires health insurance. The health insurance would cost Lina $8,000 to purchase if she pays for it herself (Lina's AGI is too high to receive any tax deduction for the insurance as a medical expense). Lina's employer has a 21 percent marginal tax rate. What is the maximum amount of before-tax salary Lina would give up to receive health insurance? (Round your answer to the nearest whole number.)arrow_forwardJing is concerned about having to repay her Old Age Security (OAS) pension that she receives. This is very stressful as she is on a very limited budget. She knows that if her income is over the minimum threshold amount, that she must repay 15% of this different through her tax return due to the OAS clawback. The maximum monthly OAS pension in 2021 is $635.26. Jing’s net income is estimated at $75,000 for the year. Jing turned 65 years old on January 1, 2021 and has been living in Canada for 25 years. She knows that the amount she will receive is a partial monthly pension earned at the rate of 1/40th of the maximum monthly OAS pension for each year of residence in Canada after the age of 18.arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT