Example 4-1

Carl Jamison, an employee for the Scharman School, belongs to a tax-deferred retirement plan to which he contributes 3 percent of his pay which is matched by the school. His biweekly pay is $2,500. Because of the deferral (3% $2,500 = $75), $2,425 is subject to federal income tax withholding.

Julie Whiteweiler made $930 this week. Only social security (fully taxable) and federal income taxes attach to her pay. Whiteweiler contributes $100 each week to her company's 401(k) plan and has $25 put into her health savings account (nonqualified) each week. Her employer matches this $25 each week.

Determine Whiteweiler's take-home pay if she is single.

Enter deductions beginning with a minus sign (-). Round your calculations and final answers 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.

Click here to access the Wage-Bracket Method Tables. https://cxp.cengage.com/itemservice/proxy/mindtap.jsp?isbn=9780357358214&cendocId=BLACFAEP0KFFZNNRP175&options={%22olrPassword%22:null,%22olrToken%22:%228EC2FBF648BF497B213B1A595361266AB6E9CA08FEE1246F397507639737BE8466DD1677524768E87FE5B9CDCAA6A165686479C7C9C8162BDBB908282AD86DA9C50821CC21FA69BF%22,%22olrUserName%22:null}

Gross pay	$930
HSA contributions	-25
401(k) deductions	-100
OASDI tax	-57.66
HI tax	-13.49
FIT	fill in the blank 6
Net pay	$fill in the blank 7

Feedback

HSA is not deductible for FIT since non-qualified plan. Calculate net pay. Consider the effect on FIT when the employee has a 401(k) deduction. Subtract the 401(k) from Gross Pay, however, the FIT taxable wages should be gross pay minus the 401(k) deduction!