Emily, who is single, has been offered a position as a city landscape consultant. The position...

Emily, who is single, has been offered a position as a city landscape consultant. The position pays $152,600 in cash wages. Assume Emily has no dependents. Emily deducts the standard deduction instead of itemized deductions, and she is not eligible for the qualified business income deduction. (Use the tax rate schedules.) (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Problem 4-31 Part-a (Algo)

a. What is the amount of Emily’s after-tax compensation (ignore payroll taxes)?

b-1. Suppose Emily receives a competing job offer of $143,000 in cash compensation and nontaxable (excluded) benefits worth $9,600. What is the amount of Emily’s after-tax compensation for the competing offer?

Solutions

Expert Solution

Ans:

Taxpayer - Emily

Status - SIngle

Tax year - 2020

Description	Amount ($)
Cash Wages	$152600
Less: Deductions for AGI	$0
Adjusted Gross Income	$152600
Less: Standard Deduction for 2020	($12400)
Taxable Income	$140200
Tax liability (as per 2020 Tax rate schedule) -working 1	$27728
Total Compensation	$152600
After tax compensation ($152600-$27728)	$124872

Working 1:

Taxable Income	Tax rate	Tax amount
Up to $9875	10%	$987.50
$9876 - $40125	$987.50 plus 12% of the amount over 9875	$4617.50
$40126 - $85525	$4617.50 plus 22% of the amount over $40125	$14605.50
$85526 - $140200	$14605.50 plus 24% of the amount over $85525	$27727.5

Tax liability of Emily is $27728.

Description	Amount ($)
Cash Wages	$143000
Less: Deductions for AGI	$0
Adjusted Gross Income	$143000
Less: Standard Deduction for 2020	($12400)
Taxable Income	$130600
Tax liability (as per 2020 Tax rate schedule) -working 2	$25424
Total Compensation ($143000 + $9600) including non taxable benefits	$152600
After tax compensation ($152600-$25424)	$127176

Working 2:

Taxable Income	Tax rate	Tax amount
Up to $9875	10%	$987.50
$9876 - $40125	$987.50 plus 12% of the amount over 9875	$4617.50
$40126 - $85525	$4617.50 plus 22% of the amount over $40125	$14605.50
$85526 - $130600	$14605.50 plus 24% of the amount over $85525	$25423.5

Tax liability of Emily is $25424

ekkarill92 answered 1 year ago

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