Question

An employee works 47 hours (47 - 40 were overtime hours) during a workweek in December of 2021. He earns $39/hour, with his employer paying 1.5 times the regular rate of pay for overtime hours. To date, he has earned $140,950 during the year. He has requested that his employer withhold 6% of gross pay, which is to be contributed to a 401(k) plan.

Taxable income for federal income tax withholding = $
Taxable income for social security tax = $
Taxable income for medicare tax = $

Answer 1

The employee's taxable income for federal income tax withholding after contributing to a 401(k) plan would be $1851.33. However, for Social Security and Medicare tax purposes, the taxable income remains the total gross income, which is $1969.5, because 401(k) contributions are pre-tax for these taxes.

Step-by-step explanation:

To calculate the taxable income for federal income tax withholding for the employee's week in December 2021, we first need to calculate the total gross income. This includes both regular and overtime pay.

Regular pay: 40 hours × $39/hour = $1560
Overtime pay: 7 hours × $39/hour × 1.5 = $409.5
Total earnings before 401(k) contribution = $1560 + $409.5 = $1969.5

Since the employee has chosen to contribute 6% of his gross pay to a 401(k) plan, the contribution amount is:
6% × $1969.5 = $118.17

Taxable income for federal income tax withholding = Total earnings before 401(k) contribution - 401(k) contribution amount
Taxable income for federal income tax withholding = $1969.5 - $118.17 = $1851.33

Since 401(k) contributions are pre-tax for social security and medicare taxes, they do not affect the taxable income for these purposes:

Taxable income for social security tax = $1969.5

Taxable income for medicare tax = $1969.5