Tom was just hired by Acme Corporation and has decided to purchase disability insurance. This insurance promises to pay him weekly benefits to replace his salary should he be unable to work because of disability. Disability insurance is also available through Acme as part of its compensation plan. Acme pays these premiums as a nontaxable
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- Wilbur has been offered a job at a salary that would put him in the 24% marginal tax bracket. In addition to his salary, he would receive health insurance coverage. Another potential employer does not offer health insurance but has agreed to match the first offer on an after-tax and insurance basis. The cost of health insurance comparable to that provided by the other potential employer is $9,000 per year. Round your answer to the nearest dollar. Wilbur will not be able to deduct the insurance as a medical expense because of the adjusted gross income floor and/or the standard deduction. How much more in salary must the second potential employer pay so that Wilbur's financial status will be the same under both offers?$fill in the blank 1arrow_forwardRosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $2,000 to $3,000. Her employer's plan permits her to set aside as much as $2,750 in the flexible benefits account. Rosa does not itemize her deductions. a. Rosa puts $1,750 into her flexible benefits account, and her actual expenses are $2,750. What is her cost of underestimating the expenses? b. Rosa puts $2,750 into her flexible benefits account, and her actual expenses are only $1,750. What is her cost of overestimating her expenses? (Assume this is a "use or lose" plan). %24 %24arrow_forwardChris has suffered a severe and prolonged disability. At the time of Chris's disability, he was entitled to receive CPP retirement benefit of $ 875 prior to becoming disabled. What is the maximum monthly CPP disability benefit he can receive, if the flat rate disability component is $445.50, and the maximum monthly disability benefit is $ 1,185.50?arrow_forward
- What is included on line 1 of 1040 in the following problem? Matthew’s annual salary from The Pour House is $98,000. Matthew’s 2018 bonus was $6,000 (received in 2019). Matthew prticipates in his employer’s group health insurance plan to which he contributed $7,200 in 2019 for medical coverage. These contributions are made with after-tax dollars. The Pour House does not provide any retirement benefits, but it has established a § 401(k) plan to enable its employees to save for retirement. Matthew contributed $19,000 to the plan in 2019. Courtney is a licensed architect who works part time as an architectural consultant. Her professional activity code is 541310. Courtney collected $72,000 in consulting fees during 2019.arrow_forwardClarence is an employee at the Drake Candy Corporation, an S corporation. Clarence and other employees are covered under a disability income plan that will pay him 50% of his $96,000 salary if he becomes disabled. The company adds the pro rata cost of the plan to each employee's W-2. Clarence is in the 25% income tax bracket. What is the amount of monthly disability benefits Clarence will receive after tax if he remains in the same tax bracket when disabled? 1. $2,250. 2. $3,000. 3. $3,500. 4. $4,000. Ⓒ$4,000. $3,500. $2,250. Ⓒ$3,000.arrow_forwardTyler earns $80,000 per year and has a 22 percent marginal tax rate. His employer is willing to provide health insurance coverage for Tyler if he will agree to a salary reduction. The insurance will cost the employer $4,680. How much salary should Tyler be willing to forgo to receive the $4,680 in health insurance coverage?arrow_forward
- Karen has been moonlighting as a life coach. This year she made over $65,000 and would like to not realize some of those earnings, maybe in a retirement account. However, she already contributes $6,000 to her qualified retirement plan at her regular employer. What can she do? A : She can contribute some of the $65,000 in a Keogh plan, if she stops participating in her employer’s plan. B : She can contribute some of the $65,000 in an employee stock ownership plan. C : She can contribute some of the $65,000 in a Keogh plan. D : She cannot do anything because she has a qualified retirement plan available at her employer.arrow_forwardDanny and Sandy have come to your office to discuss some retirement planning issues. Danny will be turning age 65 in five months and Sandy is currently 63. Danny has not started collecting Social Security benefits yet because he is still working, and he is unsure whether he will retire this year or wait a few more years. Sandy has never worked outside the home. If he continues to work, Danny will have health insurance for both himself and Sandy through his employer with a $250 annual per person deductible, a 90% coinsurance, and a maximum out-of-pocket limit of $5,000. Danny’s share of the premium is $50 per pay. Many of their retirement questions have to do with Medicare and health insurance because both Danny and Sandy have existing health issues. All the following statements are proper advice for you to give Danny and Sandy, EXCEPT: Danny should delay enrollment in Medicare Part B until he is no longer covered under his employer’s health plan. Sandy will be eligible for…arrow_forwardBilly, age 26, is an officer of Blue Company, which provides him with the . following nondiscriminatory fringe benefits in 2022: ⚫ Hospitalization insurance premiums for Billy and his dependents. The cost of the coverage for Billy is $3,325 per year, and the additional cost for his dependents is $4,825 per year. The plan has a $3,000 deductible, but his employer contributed $1,500 to Billy's Health Savings Account (HSA). Billy withdrew only $650 from the HSA, and the account earned $55 of interest during the year. Insurance premiums of $1,050 for salary continuation payments. Under the plan, Billy will receive his regular salary in the event he is unable to work due to illness. Billy collected $6,500 on the policy to replace lost wages while he was ill during the year. Billy is a part-time student working on his bachelor's degree in engineering. His employer reimbursed his $ 4,050 tuition under a plan available to all full-time employees. For each of the following items, enter the…arrow_forward
- Emily is covered by her company's health insurance plan. The health insurance costs her company $19,500 a year. During the year, Emily is diagnosed with a serious illness and health insurance pays $80,000 for surgery and treatment. How much of the insurance and treatment payments are taxable to Emily? Answer:arrow_forwardGabriella is an IT consultant. Three years ago, she completely lost her sight as the result of an accident. Gabriella has returned to work on a part-time basis, but only earning $2,000 a month, instead of the $5,000 she made prior to her accident. She has an individual disability insurance policy that has both residual disability and presumptive disability clauses. The policy has a monthly benefit of $3500. What amount of monthly benefit should Gabriella be receiving presently, assuming that the benefit is payable for ten years? Question 37 options: $2,100 per month. $3,500 per month. $5,000 per month. $1,500 per month.arrow_forwardConsider a worker, Janice, who has the option to purchase DI (disability insurance) on the private market. Janice becomes disabled with probability q = 0.01. She can purchase DI by paying the premium р. If the Janice is disabled, she will earn no income. But if she is insured, she will receive a total payment of $15,000 from the insurance company (her consumption will be $15,000). If the Janice is not disabled, she earns an income of $20,000. She has utility: U = 3C3 where C is the amount of consumption. Determine the actuarially fair insurance premium, p". Write down the expected utility function for Janice if she purchases insurance at the actuarially fair price. Will Janice choose to purchase this disability insurance? Explain. What is the most she would be willing to pay for DI insurance?arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT