Question

Julie Whiteweiler made $930 this week. Only social security (fully taxable) and federal income taxes attach to her pay. Whiteweiler contributes $100 each week to her company's 401(k) plan and has $25 put into her health savings account (nonqualified) each week. Her employer matches this $25 each week.

Required:
Determine Whiteweiler's take-home pay if she is single and claims 4 allowances (use the wage-bracket method).

Answer 1

Step 1: Calculate FICA (OASDI & HI):

Total wage subjected to FICA is $930. Why? Contributions to 401K is only exempted from Fed. Income Tax Withholding (FIT) not FICA. As for HSA contrib., it is exempted for both FICA and FIT. However, the plan is non-qualified, which means that $25 contributed by employee is taxable for both. The $25 matching from employer for HSA is excluded from income and income taxes.

OASDI RATE 2012: 4.2% of $930; therefore, $39.06

HI RATE 2012: 1.45% of $930; therefore, $13.49

TOTAL FICA TAX: $52.55

STEP 2: Calculate FIT:

Total earnings subjected to FIT is ($930-100)= $830. Why? $100 contributions to 401k is exempted from FIT. HSA contrib. is unqualified.; therefore, contributions from employee is taxable. Using Wage Bracket Method 2012, the FIT is $89.

STEP 3: Getting the Take-Home Pay answer:

($930-100(401k))-25(HSA:Employee)-$52.55(FICA)-89(FIT)=$663.45

Step-by-step explanation: