Calculations All Sections

Problem # 1 An employee qualifies for the foreign housing cost exclusion under the physical presence. The employee’s reasonable housing expenses are $27,500 and the employee’s annual salary is $150,000. Calculate the foreign housing cost exclusion for the employee. Answer: $10,876 $103,900 (foreign earned income exclusion) x .16 = $16,624 (base housing) $27,500 - $16,624 = $10,876

Problem # 2 An U.S. Citizen, who is a bona-fide resident of Great Britain, has an annual salary of $105,000. The employee’s COLA is $11,000 and housing allowance is $18,000. The employee works 4 days in a normal workweek. The employee worked 35 days in the U.S. during the year and worked a total of 49 weeks after subtracting vacation taken. Calculate the U.S. source income for the employee. Answer: $24,120.00 49 weeks x 4 days/week = 196 days 35 / 196 = .17857 $105,000 + $11,000 + $18,000 = $134,000 $134,000 x .18 = $24,120

Problem # 3 An alien employee is present in the U.S. for 113 days during the current year, 242 days during the first preceding year, and 92 days during the second preceding year. How many days is the employee present in the U.S. under the substantial presence test? Answer: 209 days 113 + (242/3) + (92/6) 113 + 80.6667 + 15.3333 = 209 days

Problem 4 A nonexempt tipped employee worked 38 hours in the current workweek and received $175 in tips. The employer utilizes the tip credit. Under FLSA, calculate the employee’s gross pay for the workweek. Answer: $275.32 $2.13 x 38 = $80.94 + $175.00 = $255.94 $255.94 / 38 = $6.735 $7.25 - $6.74 = $0.51 $0.51 x 38 = $19.38 $80.94 +$175.00 +$19.38 = $275.32 $275.32 / 38 = $7.245

Problem 5 A nonexempt employee, who is paid bi-weekly, works the following hours during the pay period. Week 1: 27 hours at $12.00 per hour; 16 hours at $14.00, and Week 2: 10 hours at $12.00 per hour; 37 hours at $16.00. Under FLSA, calculate the employee’s gross pay for the workweek. Answer: $1,332.17 Week 1: $324.00 [$12 x 27] + $224.00 [$14.00 x 16] = $548.00 27 + 16 = 43 – 40 = 3 overtime hours Week 1 $548.00 / 43 = $12.74 x .5 = $6.37 x 3 = $19.11 Week 2: $120.00 [$12.00 x 10] + $592.00 [$16.00 x 37] = $712.00 10 + 37 = 47 – 40 = 7 overtime hours Week 2 $712.00 / 47 = $15.15 x .5 = $7.58 x 7 = $53.06 + $712.00 + $19.11 + $548.00 = $1,332.17

Problem # 6 An employee has child and dependent care expenses of $8,000.00 during the year and the employer reimburses the employee in full during the same year. What amount of the reimbursement is taxable income to the employee? Answer: $3,000.00 $8,000.00 - $5,000.00 = $3,000.00

Problem # 7 Using the vehicle cents-per-mile method, calculate the mileage reimbursement to be taxed when the employee reports using the company-provided vehicle for personal use. The personal mileage reported is 4,500 miles. The employee paid for the fuel. Answer: $2,205.00 $0.545 [standard business rate] - $0.055 [employee-paid fuel] = $0.49 $0.49 x 4,500 = $2,205.00

Problem # 8 Under §127 of the Educational Assistance Program, the employer reimbursed the employee $9,000.00 for non-job related education during the year. Calculate the taxable income for this reimbursement. Answer: $3,750.00 $9,000.00 - $5,250.00 = $3,750.00

Problem # 9 The employer reimburses the employee $330.00 for a monthly transit pass. What amount of the reimbursement is taxable income to the employee? Answer: $70.00 $330.00 - $260.00 = $70.00

Problem # 10 Under the employer’s adoption assistance program, the employee receives a payment of $10,000.00 during the year. Neither the employee nor the employee’s spouse will reach the income limitation in 2018 or 2019. Calculate the remaining nontaxable benefit available for the employee. Answer: $3,810.00 $13,810.00 - $10,000.00 = $3,810.00

Problem # 11 The employee reported 1,900 miles for traveling from the old residence to the new residence during the final relocation move. The employer reimburses the employee at the current standard business mileage rate per the relocation policy. Calculate the taxable portion of the relocation mileage. Answer: $1,035.50 $0.545 [standard business rate] = $0.545 $0.545 x 1,900 = $1,035.50

Problem # 12 An employee receives a 30% discount on services provided by the employer. The employer normally offers these services to the general public for $5,000.00, which is the established fair market value. What amount of the service is taxable income to the employee? Answer: $500.00 30% - 20% = 10% $5,000.00 x 10% = $500.00

Problem # 13 Under the commuting valuation method, calculate the taxable income on the personal usage of the employer-provided vehicle for the workweek. The employee worked 6 days in the workweek and drove the vehicle between home and work each day. The employee has met the qualifications for the commuting valuation method. Answer: $18.00 $1.50 x 2 = $3.00 (round trip) $3.00 x 6 (days) = $18.00

Problem # 14 The employer reimburses the employee $300.00 for a monthly parking pass at a nearby parking lot. What amount of the reimbursement is taxable income to the employee? Answer: $40.00 $300.00 - $260.00 = $40.00

Problem # 15 Calculate the monthly imputed income on the group-term life insurance provided by the employer. The insurance coverage is 3.5 times the employee’s annual salary and has a coverage cap of $200,000. The employee’s annual salary is $70,000 and will be 52 on December 31st. The employee has a post-tax contribution of $4.50 per month deducted. Answer: $30.00 $70,000.00 x 3.5 = $245,000.00 $200,000.00 - $50,000.00 = $150,000.00 $150,000.00 / $1,000.00 = $150.00 $150.00 x $0.23 = $34.50 $34.50 - $4.50 = $30.00

Problem # 16 Under the annual lease valuation method, calculate the imputed income for the employee on the employer-provided vehicle. The employee drove 22,000 miles during the year of which 15,700 miles were for business. The vehicle’s FMV is $46,700.00. Answer: $3,508.40 15,700 / 22,000 = 71.363% 100% - 71.36% = 28.64% 12,250 [annual lease value] x 28.64% = $3,508.40

Problem # 17 An employee is injured away from work during the month of July, receives $1,500.00 per month in disability payments from a third-party provider for 10 calendar months beginning August 1st. The employer has paid 70% of the disability insurance premiums and the employee paid the remaining 30% through an after-tax payroll deduction. Calculate the amount that are social security and Medicare taxable. Answer: $6,300.00 $1,500.00 x 6 = $9,000.00 $9,000.00 x 70% = $6,300.00

Problem # 18 Calculate the employee’s Medicare taxable wages from the following information. Gross Wages: $7,500.00 YTD Taxable Wages: $42,750.00 Cafeteria Plan Deductions: $375.00 401(k) deferral: $750.00 Answer: $7,125.00 $7,500.00 – $375.00 = $7,125.00

Problem # 19 An employee is injured away from work during the month of July, receives $1,250.00 per month in disability payments from a third-party provider for 8 calendar months beginning August 1st. The employer has paid 70% of the disability insurance premiums and the employee paid the remaining 30% through an after-tax payroll deduction. Calculate the amount that is subject to federal income tax withholding. Answer: $7,000.00 $1,250.00 x 8 = $10,000.00 $10,000.00 x 70% = $7,000.00

Problem # 20 An employee, who is 42 years of age, is paid an annual salary of $300,000. The employee participates in a §401(k) plan that allows employees to elect to defer up to 20% of their annual salary. Calculate the employee contribution when the employee elects to defer 5% of their annual salary. Answer: $13,750.00 Annual Compensation Limit = $275,000.00 $275,000.00 x 5% = $13,750.00

Problem # 21 Calculate the employee’s federal income taxable wages from the following information. Gross Wages: $9,500.00 YTD Taxable Wages: $32,400.00 Cafeteria Plan Deductions: $450.00 401(k) deferral: $950.00 Answer: $8,100.00 $9,500.00 – $450.00 - $950.00 = $8,100.00

Problem # 22 An employee, who is single and 52 years of age, earns $57,500.00 annually. Calculate the maximum IRA contribution the employee is allowed. Answer: $6,500.00 $57,500.00 x 100% = $57,500.00 AGI reduction amount is $63,000.00 IRS §219(g)(3)(B)(ii) Allowable contributions for an employee 52 years of age $5,500.00 + $1,000 [50+ catch-up] = $6,500.00

Problem # 23 Calculate the employee FUTA taxable wages from the following information. Semi-monthly salary: $3,833.00 YTD Taxable Wages: $0.00 Cafeteria Plan Deductions: $100.00 per month 401(k) deferral: 8% of salary Answer: $3,783.00 $100.00 x 12 = $1,200.00 / 24 = $50.00 $3,833.00 – $50.00 = $3,783.00

Problem # 24 An employee is injured away from work during the month of July, will receive $1,750.00 per month in disability payments from a third-party provider for 11 calendar months beginning August 1st. The employer has paid 70% of the disability insurance premiums and the employee paid the remaining 30% through an after-tax payroll deduction. Calculate the amount that will be reported on the employee’s Form W-2, Box 12, Code J during the current tax year. Answer: $2,625.00 $1,750.00 x 5 [August through December] = $8,750.00 $8,750.00 x 30% = $2,625.00

Problem # 25 An employee is to receive a year-end bonus of $20,000.00 The employer has agreed to pay all taxes on the bonus. The employee has been paid $215,000.00 year-to-date and works in a state with no supplemental wage withholding rate. Calculate the gross pay for this year-end bonus payment. Answer: $26,437.54 22% + 1.45% + .90% = 24.35% 100% – 24.35% = 75.65% $20,000.00 / 75.65% = $26,437.5413 Proof: Taxes: $5,816.26 + $383.34 + $237.94 = $6,437.54 $26,437.54 - $6,437.54 = $20,000.00

Problem # 26 An employee is to receive a year-end bonus of $6,000.00 The employer has agreed to pay all taxes on the bonus. The employee has been paid $100,000.00 year-to-date and works in a state with no supplemental wage withholding rate. Calculate the gross pay for this year-end bonus payment. Answer: $8,528.78 22% + 6.2% + 1.45% = 29.65% 100% – 29.65% = 70.35% $6,000.00 / 70.35% = $8,528.78 Proof: Taxes: $1,876.33 + $528.78 + $123.67 = $2,528.78 $8,528.78 - $2,528.78 = $6,000.00

Problem # 27 An employee is to receive a year-end bonus of $150,000.00 The employer has agreed to pay all taxes on the bonus. The employee has been paid $1,258,000.00 year-to-date in supplemental wages. Calculate the gross pay for this year-end bonus payment. Answer: $247,320.69 37% + 1.45% + .90% = 39.35% 100% – 39.35% = 60.65% $150,000.00 / 60.65% = $247,320.69 Proof: Taxes: $91,508.66 + $3,586.15 + $2,225.89 = $97,320.70 $247,320.69 - $97,320.70 = $149,999.99

Problem # 28 An employee is to receive a year-end bonus of $10,000.00 The employer has agreed to pay all taxes on the bonus. The employee has been paid $125,400.00 year-to-date and works in a state with no supplemental wage withholding rate. Calculate the gross pay for this year-end bonus payment. Answer: $13,306.34 $128,400.00 - $125,400.00 = $3,000.00 x 6.2% = $186.00 22% + 1.45% = 23.45% 100% – 23.45% = 76.55% ($10,000.00 + $186.00) / 76.55% = $13,306.3357 Proof: Taxes: $2,927.39 + $192.94 + $186.00 = $3,306.33 $13,306.34 - $3,306.33 = $10,000.01

Problem # 29 An employee is to receive a year-end bonus of $45,000.00 The employer has agreed to pay all taxes on the bonus. The employee has been paid $185,000.00 year-to-date and the employee works in a state with no supplemental wage rate. Calculate the gross pay for this year-end bonus payment. Answer: $59,306.01 $200,000.00 - $185,000.00 = $15,000.00 $15,000.00 x .9% = $135.00 22% + 1.45% + .90% = 24.35% 100% – 24.35% = 75.65% ($45,000.00 - $135.00)/ 75.65% = $59,306.01 Proof: Taxes: $13,047.32 + $859.94 + $398.75* = $14,306.01 *(($185,000 + $59,306.01)-$200,000) x .9% $59,306.01 - $14,306.01 = $45,000.00