Question

George Clausen (age 48) is employed by Kline Company and is paid an annual salary of $42,640. He has just decided to join the company's Simple Retirement Account (IRA form) and has a few questions. Answer the following for Clausen: Round your answer to the nearest cent.

As we go to press, the federal income tax rates for 2023 are being determined by budget talks in Washington, and are not available for publication. For this edition, the 2022 federal income tax tables for Manual Systems with Forms W-4 from 2020 or Later with Standard Withholding and 2022 FICA rates have been used.

a. What is the maximum that he can contribute into this retirement fund?

14,000-correct answer

b. What would be the company's contribution?


1,279.20-correct answer

Note: For items c. & d. below, round interim amounts to two decimal places. Use these values in subsequent computations then round final answer to two decimal places.

c. What would be his weekly take-home if he contributes the maximum allowed retirement contribution (married filing jointly, wage-bracket method , and a 2.3% state income tax on total wages)?

437.18- this answer is incorrect.

d. What would be his weekly take-home pay without the retirement contribution deduction?

404.18 this is answer is incorrect
Attached is the Wage Bracket Table

a & b. See SIMPLE contribution limits.

c. Calculate take-home pay. Please note to consider the amount of earnings taxable for FIT when there is a retirement contribution.

d. Calculate take-home pay without the retirement contribution. Compare the FIT on parts c and d, then compare the take-home pay.

Answer 1

I apologize for the inaccuracies in my previous response. Without more information such as the specific tax table and withholding forms being used, it is difficult to provide accurate calculations for c and d. However, I can provide some general guidance on how to calculate take-home pay with and without the retirement contribution deduction.

For c, you would need to first calculate the federal income tax (FIT) on the taxable portion of George's salary, taking into account the retirement contribution. To do this, you would use the appropriate tax table, such as the one provided in the attached file, and find the tax bracket that corresponds to George's taxable income. Next, subtract the retirement contribution from his salary to get his taxable income, and use that to find the FIT. Then subtract the FIT and any other deductions, such as state income tax and FICA, from George's salary to find his take-home pay.

For d, you would calculate the FIT and other deductions on George's salary without the retirement contribution. Then subtract these amounts from his salary to find his take-home pay without the retirement contribution. By comparing the take-home pay in parts c and d, you can see the effect of the retirement contribution on George's take-home pay.

It is also important to consider any other deductions or credits that may apply to George's situation, and consult with a tax professional or use tax preparation software to ensure that the calculations are accurate.

Step-by-step explanation: