Question

Karen and Katie are looking at the company's health care options and trying to determine how much their net pay will decrease if they sign up for the qualified cafeteria plan offered by the company. Karen, a married woman with four exemptions, earns $2,000 per biweekly payroll. Katie, a single woman with one exemption, also earns $2,000 per biweekly payroll. The biweekly employee contribution to health care that would be subject to the cafeteria plan is $100. Compute the net pay for Karen and Katie. Assume that they are subject to federal income tax (using the wage-bracket method) and FICA taxes and have no other deductions from their pay. When wages fall on the end of a bracket, use the lower end. Use the Wage Bracket Method Tables for Income Tax Withholding in Appendix C. (Round your answers to 2 decimal places.) Tax Year 2016

Answer 1

arena’s taxable income if she declines to participate in the cafeteria plan	2000
Karen's taxable income if she participates in the cafeteria plan	1900	=2000-100
Katie's taxable income if she declines to participate in the cafeteria plan	2000
Katie's taxable income if she participates in the cafeteria plan	1900	=2000-100

--------------------------------------------------------------------------------------------------------------------------

Hope that helps.

Feel free to comment if you need further assistance J