Rick who is single has been offered a position as a city lan

Rick, who is single, has been offered a position as a city landscape consultant. The position pays $125,000 in cash wages. Assume Rick files single and is entitled to one personal exemption. Rick deducts the standard deduction instead of itemized deductions. (use the tax rate schedules.)

b-1. Suppose Rick receives a competing job offer of $120,000 in cash compensation and nontaxable (excluded) benefits worth $4,000. What is the amount of Rick’s after-tax compensation for the competing offer?

2017 Tax Rate Schedule Schedule X-Single Schedule Z-Head of Household If taxable income is over: If taxable income is over. But not But not over: $ 13,350 $ 50,800 over The tax is: The tax is: 10% of taxable income $ 1 ,335.00 plus 1 5% of the excess over $13,350 $6,952.50 plus 25% of the excess over $50,800 $27,052.50 plus 28% of the excess over $131,200 $49,816.50 plus 33% of the excess over $212,500 $117,202.50 plus 35% of the excess over $416,700 $ 1 26,950.00 plus 39.6% of the excess over $444,550 $ 10% of taxable income $932.50 plus 15% of the excess over $9,325 $5.226.25 plus 25% of the excess over $37,950 $ 1 8.7 13.75 plus 28% of the excess aver $91,900 $ 46,643.75 plus 33% of the excess over $191,650 $ 1 2091 0.25 plus 35% of the excess over $416,700 $12 1,505.25 plus 39.6% of the excess cver $418,400 0 9,325 0 $ 9,325 $37,950 $ 9 1 ,900 $ 1 9 1 ,650 $41 6,700 $418,400 $ 37,950 $ 91,900 $ 1 9 1 ,650 $41 6,700 $41 8,400 $ 13,350 $ 50,800 $ 1 3 1,200 $212,500 $416,700 $444,550 $ 1 3 1,200 $21 2,500 $416,700 $444,550 Schedule Y-1-Married Flling Jointly or Qualifying Widow(er) Schedule Y-2-Married Filing Separately If taxable income is over. But not If taxable income is over: But not over: The tax is: over: The tax is: 0 $ 9,325 10% of taxable income $ 1.865.00 plus 15% of the excess over $18,650 $ 10.452.50 plus 25% of the excess over $75,900 $29,752.50 plus 28% of the excess over $153,100 $52.222.50 plus 33% of the excess cver $233,350 $112,728.00 plus 35% of the excess aver $416,700 $13 1 ,628.00 plus 39.6% of the excess over $470,700 $ 9,325 $ 37,950 $ 76,550 $116,675 $208,350 $235,350 $ 37,950 $ 76,550 $116,675 $208,350 $235,350 10% of taxable income $932.50 plus 15% of the excess over $9,325 $5,226.25 plus 25% of the excess over $37,950 $14,876.25 plus 28% of the excess over $76,550 $26,1 11.25 plus 33% of the excess over $116,675 $56,364.00 plus 35% of the excess over $208,350 $65,814.00 plus 39.6% of the excess over $235,350 0 $ 18,650 $ 18,650 $ 75,900 $153,100 $233,350 $416,700 $470,700 $ 75,900 $153,100 $233,350 $416,700 $470,700

Solution

When rick is earning $125000 Tax will be as follows:

18713.75$+ 28/100(125000-91900)

=18713.75+9268

=27981.75$

Less: standard deduction (6350$)

Total tax liability=27981.75-6350 =21631.75

B-1 Suppose Rick is getting cash compensation:

now the earning is 125000+120000=425000$

tax liability will be=121505.25+39.6/100(425000-418400)

=121505.25+2613.6

=124118.85$

less:standard deduction=6350

net liability for tax=117768.85

Amount of compensation:

total compensation=124000

Less:tax deducted = (96137.1)Note1

Amount received=124000-96137.1=27862.1$

Note 1: Total tax is 117768.85 but out of this 21631.75 is not related to competing job offer so it will not be deducted by employer