Question

Required information Problem 4-31 (LO 4-1) (Static) [The following information applies to the questions displayed below.] Emily, who is single, has been offered a position as a city landscape consultant. The position pays $125,000 in cash wages. Assume Emily has no dependents. Emily deducts the standard deduction instead of itemized deductions, and she is not eligible for the qualified business income deduction. (Use the tax rate schedules.) Problem 4-31 Parts b-1 to b-2 (Static) b-1. Suppose Emily receives a competing job offer of $120,000 in cash compensation and nontaxable (excluded) benefits worth $5,000. What is the amount of Emily’s after-tax compensation for the competing offer? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Answer 1

Answer:

What is the amount of Emily’s after-tax compensation for the competing offer?

• $105,097

Explanation:

I will use the 2020 tax brackets:

Emily's expected gross income $125,000 - $12,400 standard deduction = $112,600 taxable income

tax liability = $14,605.50 + [24% x ($112,600 - $85,525)] = $21,103.50

Emily's net pay = $125,000 - $21,103.50 = $103,896.50

competing offer:

Emily's expected gross income $120,000 - $12,400 standard deduction = $107,600 taxable income

tax liability = $14,605.50 + [24% x ($107,600 - $85,525)] = $19,903.50

Emily's net pay = $120,000 - $19,903.50 + $5,000 = $105,096.50 ≈ $105,097