Assume you are offered a job with a salary of $42,000 and a bonus of 7 5 based on your performance during the year If you receive your full bonus at the end of the year, what is your total (gross or before tax) pay for the year Assume you are filing under single status Using the income tax table provided below, answer the following questions ANNUAL Payroll Period (a) SINGLE person (including head of household) If the adjusted wage amount is The amount of income tax to withhold is Over But Not Over $0 $3,950 $0 $3,950 $13,900 $0 10 of excess over $3,950 $13,900 $44,475 $995 00 plus 12 of excess over $13,900 $44,475 $90,325 $4,664 00 plus 22 of excess over $44,475 $90,325 $168,875 $14,751 00 plus 24 of excess over $90,325 $168,875 $213,375 $33,603 00 plus 32 of excess over $168,875 $213,375 $527,550 $47,843 00 plus 35 of excess over $213,375 $527,550 $157,804 25 plus 37 of excess over $527,550 What is your marginal tax rate What is your average (effective) tax rate First determine the actual tax withheld from your income Ignore payroll and state taxes Use the income calculated in part 1 a Why do the two tax rates vary Explain why the US tax code is structured in this manner Do you agree with this structure Why or why not Calculate your take home pay using the pay in part 1 a and the taxes calculated in part 1 b ii (ignore employment taxes) Which is the relevant tax rate (marginal or average) as you consider whether or not you should work a second job and increase your income to help you pay off your student loans more quickly Why Your employer offers a 401k that you can invest in as an employee of the firm If you put in 3 of your pre tax income (listed in question 1 a ), your employer will match 3 Include the bonus in your total income Assuming you put in the full 3 during your first year of employment, how much will your take home pay be reduced In other words, what is the difference between your take home pay without the 401k contribution (from part 1 b iv ) and your take home pay after a 401k contribution If you contribute the 3 to your 401k and your employer matches, how much will you have saved in total in your 401K account for the year (counting your employer contribution and your contribution)

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Posted on Feb 15, 2021

Assume you are offered a job with a salary of $42,000 and a bonus of 7.5% based on your performance during the year.

If you receive your full bonus at the end of the year, what is your total (gross or before tax) pay for the year?

Assume you are filing under single status. Using the income tax table provided below, answer the following questions.

ANNUAL Payroll Period (a) SINGLE person (including head of household)

If the adjusted wage amount is:		The amount of income tax to withhold is:
Over	But Not Over
$0	$3,950	$0
$3,950	$13,900	$0 + 10% of excess over $3,950
$13,900	$44,475	$995.00 plus 12% of excess over $13,900
$44,475	$90,325	$4,664.00 plus 22% of excess over $44,475
$90,325	$168,875	$14,751.00 plus 24% of excess over $90,325
$168,875	$213,375	$33,603.00 plus 32% of excess over $168,875
$213,375	$527,550	$47,843.00 plus 35% of excess over $213,375
$527,550		$157,804.25 plus 37% of excess over $527,550

What is your marginal tax rate?
What is your average (effective) tax rate? First determine the actual tax withheld from your income. Ignore payroll and state taxes. Use the income calculated in part 1.a.
Why do the two tax rates vary? Explain why the US tax code is structured in this manner. Do you agree with this structure? Why or why not?
Calculate your take-home pay using the pay-in part 1.a. and the taxes calculated in part 1.
b.ii. (ignore employment taxes)
Which is the relevant tax rate (marginal or average) as you consider whether or not you should work a second job and increase your income to help you pay off your student loans more quickly? Why?
Your employer offers a 401k that you can invest in as an employee of the firm. If you put in 3% of your pre-tax income (listed in question 1.a.), your employer will match 3%. Include the bonus in your total income.
Assuming you put in the full 3% during your first year of employment, how much will your take-home pay be reduced? In other words, what is the difference between your take-home pay without the 401k contribution (from part 1.b.iv.) and your take-home pay after a 401k contribution?
If you contribute the 3% to your 401k and your employer matches, how much will you have saved in total in your 401K account for the year (counting your employer contribution and your contribution)?