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In: Accounting

Joe has an annual income of $80,000. His employer pays all of his health insurance premiums....

Joe has an annual income of $80,000. His employer pays all of his health insurance premiums.
Joe expects to incur $2,000 in unreimbursed medical expenses for the year. He pays an average
federal tax rate of 22%. In addition, his state has a flat 3% income tax rate. Thus, his total
income taxes paid will be equal to 25% of his taxable income. Joe expects to deduct $15,000
from his annual income for income tax purposes.
a. How much income tax will Joe pay in total (state plus federal)?

b. How much FICA (payroll) tax will Joe pay? How much will his employer pay? What
fraction of the total payroll tax can be attributed to Medicare?

c. Joe decides to redirect $2,000 of his salary to a flexible spending account. This
contribution is considered a salary reduction, which means it reduces both the payroll
taxes and the income taxes Joe needs to pay. What are the total taxes Joe needs to pay
now? How much money has he saved?

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ekkarill92 answered 10 months ago
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