1. Your friend John receives take-home pay of $2,542.25 twice a month. In reviewing the current pay...
Question:
1. Your friend John receives take-home pay of $2,542.25 twice a month. In reviewing the current pay stub, you notice the following: Federal income taxes withheld of $480., FICA of $217., Medicare of $50.75, and state tax withholding of $210.
2. John is single and does not itemize
3. Determine (Using 2021 rates and standard deduction amounts!):
a. the amount of taxable wages that are to be reported on line 1 of Form 1040
b. The amount of taxable income John has on line 15 on Form 1040 (page 1)
c. The federal income tax liability on line 16 of Form 1040 (page 2)
d. The amount of refund or balance due (either line 34 or line 35 on page 2 of Form 1040)
e. What is John’s average rate of tax when adding up the actual federal taxes, FICA and Medicare, and state income taxes? (assume that state income taxes withheld equals the actual state income tax liability)
f. What is Sam’s marginal tax rate for the next $1000 of earnings? This would the federal and state rates plus FICA and Medicare.
4. Deliverable—a simple excel sheet clearly identifying the 6 requested items in 3.
No need to complete a state tax computation.
Hint: you need to figure out first what his gross semi-monthly pay is. Think about taking either the FICA or the Medicare and dividing through with the withholding rate.
