Section PF.6 – Practice Problems

1. Thairah would like to have extra spending money, so he decides to work part-time at Fry’s Food.  The job pays $16.20 per hour and he works 27 hours per week.  His employer withholds 7.9% of his gross pay for federal taxes, 7.65% for FICA taxes, and 2.2% for state taxes.

a. What is his weekly gross pay?
b. How much is withheld per week for federal taxes?
c. How much is withheld per week for FICA taxes?
d. How much is withheld per week for state taxes?
e. What is his weekly net pay?
f. What percentage of his gross pay is withheld for taxes?

2. Dejanee decides to work part-time at a pool business.  The job pays $18.80 per hour and she works 12 hours per week.  Her employer withholds 8.8% of her gross pay for federal taxes, 7.65% for FICA taxes, and 2.6% for state taxes.

a. What is her weekly gross pay?
b. How much is withheld per week for federal taxes?
c. How much is withheld per week for FICA taxes?
d. How much is withheld per week for state taxes?
e. What is her weekly net pay?
f. What percentage of her gross pay is withheld for taxes?

3. Shane is employed as a library assistant at Mesa Public Library. He earned $36,474 last year. His employer withheld 11% of his gross pay for federal taxes. Shane calculated his federal taxes and found that he owes $5,638. Will Shane owe more taxes at the end of the year or get a refund? How much?

4. JD and Raynah are married and filing jointly. JD earned $61,288 and his employer withholds 8.7% of his gross pay for federal taxes. Raynah earned $64,470 and her employer withholds 7.4% for federal taxes. They calculated their federal taxes and found that they owe $8540. Do they owe more at the end of the year or get a refund?  How much?

For problems 5-6, Calculate the change in annual take-home pay when the following tax-deferred contributions are made. Assume the marginal tax rate does not change due to the tax-deferred contributions.

5. You are single and have a taxable income of $101,660. You make monthly contributions of $900 to a tax-deferred saving plan.

6. You are married filing jointly and have a taxable income of $88,927. You make monthly contributions of $700 to a tax-deferred saving plan.

7. Suppose your marginal tax rate is 22%. Assume the marginal tax rate does not change due to the tax deductions.

a. How much does a $2500 charitable contribution (which is tax deductible) save you? Answer for both the case in which you itemize deductions and for the case in which you take the standard deduction.

b. How much does a $2500 tax credit save you? Answer for both the case in which you itemize deductions and for the case in which you take the standard deduction.

8. Suppose your marginal tax rate is 35%. Assume the marginal tax rate does not change due to the tax deductions.

a. How much does a $3900 charitable contribution (which is tax deductible) save you? Answer for both the case in which you itemize deductions and for the case in which you take the standard deduction.

b. How much does a $3900 tax credit save you? Answer for both the case in which you itemize deductions and for the case in which you take the standard deduction.

9. Jake’s marginal tax rate is 32%. Monique’s marginal tax rate is 10%. They each itemize their deductions. They each donate $4000 to charity. Compare their true costs for the charitable donation.

10. Serenity’s marginal tax rate is 24%.  Moses’ marginal tax rate is 12%. They each itemize their deductions. They each donate $500 to charity. Compare their true costs for the charitable donation.