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Box 3 on the W-2 shows the taxable income for Social Security. Box 4 should show the amount of Social Security tax withheld. What amount should be in box 4? (See Example 1 and Example 2.)
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In 2010, the Social Security tax for employees was 6.2%. So, this employee's Social Security tax is
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Box 5 on the W-2 shows the taxable income for Medicare. Box 6 should show the amount of Medicare tax withheld. What amount should be in box 6? (See Example 1and Example 2.)
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Box 16 on the W-2 shows the taxable income for Colorado. Box 17 should show the amount of state income tax withheld. Colorado has a flat income tax of 4.63%. What amount should be in box 17? (See Example 1 and Example 2.)
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In 2010, Colorado had a flat income tax rate of 4.63%. So, this employee's Colorado income tax was
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John Doe contributes 3% of his salary to a 401(k) retirement plan. This amount is shown in box 12a. How much is John Doe's salary in 2010? (See Example 1 and Example 2.)
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What percent of John Doe's salary should be withheld to pay federal, Social Security, Medicare, state, and local taxes? (See Example 1 and Example 2.)
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From the W-2 statement, add boxes 2, 4, 6, 17, and 19 to find this employee's total tax liability.
This means that the total percent paid for taxes was
So, this taxpayer paid almost a quarter of his gross wages for taxes.
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In addition to John Doe's salary, Company A pays a 3% matching contribution to a 401(k) retirement plan and $560 a month for John Doe's health insurance. (See Example 1 and Example 2.)
- What is the total compensation package Company A is paying for John Doe? (Note: Worker's Compensation Insurance and Unemployment Insurance are not included for simplicity.)
- How much does John Doe receive each year as "take-home pay"?
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