Question

part 2 — completing form 1040 (simplified)fill in the values:| 1040 line | description | student entry || ---- | ---- | ---- || line 1 | wages, salaries, tips (from w-2 box 1) | 38,450 || line 11 | adjusted gross income (agi) — assume no adjustments | 38,450 || line 12 | standard deduction (single: $14,600; married filing jointly: $29,200) | 14,600 || line 15 | taxable income (line 11 minus line 12) | 23,850 || line 18 | total tax (use tax table provided by teacher) | 2,614 || line 25a | federal income tax withheld (w-2 box 2) | 3,250 || line 34 | refund (if line 25a > line 18) | 636 || line 37 | amount you owe (if line 18 > line 25a) | 0 |part 3 — short answer1. if jordan contributed $1,500 to a 401(k), why does box 1 show a lower taxable wage than total earnings?answer: _____________2. explain how withholding affects whether a taxpayer gets a refund or owes money.answer: _____________

Explanation:

1. 401(k) contributions are pre-tax deductions. They reduce the amount of income that is subject to federal income tax, so Box 1 (which reports taxable wages) is lowered by the contribution amount while total earnings remain unchanged.
2. Withholding is the amount of federal income tax taken out of each paycheck and sent to the IRS on the taxpayer's behalf. If the total withholding (Line 25a) is more than the total tax owed (Line 18), the taxpayer gets a refund. If the total withholding is less than the total tax owed, the taxpayer owes additional money to the IRS.

Answer:

1. 401(k) contributions are pre-tax, so they reduce taxable wages (Box 1) without lowering total earnings, as they are subtracted before calculating taxable income.
2. If total federal income tax withheld (Line 25a) is greater than the total tax owed (Line 18), the taxpayer receives a refund. If withheld tax is less than the total tax owed, the taxpayer owes additional money.