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 2021 are being determined by budget talks in Washington and not available for publication. For this edition, the 2020 federal income tax tables for Manual Systems with Forms W-4 from 2020 or later with Standard Withholding and 2020 FICA rates have been used.

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

b. What would be the company's contribution?

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)?

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

Answer 1

Question A

The maximum that he can contribute to this retirement fund = $ 12,500

 

 

Question B

The company's contribution (42640*3%) - $ 1,279.20

 

 

Question C

Weekly Pay (42640/52) - $ 820

 

Less: Weekly Retirement Contribution (12500/52) $ 240.38

Weekly Wages $ 579.62

Less: FICA Tax (820*(6.2%+1.45%)) $   62.73

Federal Income Tax $   20.00

State Income Tax $   18.86

Weekly Take Home Pay $  478.03

 

 

Question D

Weekly Pay (42640/52) $      820.00

 

Less:FICA Tax (820*(6.2%+1.45%)) $        62.73

Federal Income Tax $        44.00

State Income Tax $       18.86

 

Weekly Take Home Pay $      694.41

A: $12,500

B: $1,279

C: $478.03

D: $694.41