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Section 125 cafeteria plans
125 cafeteria plan - Flexible spending accounts
Pay less tax, increase take-home pay


A "Section 125 Cafeteria Plan," often referred to as a "Flexible Spending Account," helps you keep more of your paycheck by reducing the federal and state taxes. These 125 Cafeteria Plans allow an employee to pay certain expenses before taxes are deducted from the paycheck. These expenses include daycare, insurance premiums and most out-of-pocket medical costs. Use this 125 Cafeteria Plan calculator to see how participating in the employer's "Section 125 Cafeteria Plan" can help you pay less tax and increase net take-home pay. This 125 Cafeteria Plan calculator has been updated to use the new withholding schedules for 2007

   125 cafeteria plan - Flexible spending accounts

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Definitions
Pay period: This is how often you are paid. Your selections are: weekly (52 paychecks per year), every other week (26 paychecks per year), twice a month (24 paychecks per year), monthly (12 paychecks per year) and annually (one paycheck per year).
Gross pay: This is your gross pay, before any deductions, for the pay period. Please enter a dollar amount from $1 to $1,000,000.
Filing status: This is your income tax filing status. The choices are "Single" and "Married." Choose "Married" if you are married or file as "head of household." Choose "Single" if you file your taxes as a single person or if you are married but file separately.
Number of allowances: When your federal income tax withholdings are calculated, you are allowed to claim allowances to reduce the amount of the federal income tax withholding. In 2009, each allowance you claim is equal to $3,650 of income that you expect to have in deductions when you file your annual tax return. The number of allowances you should claim depends largely on the number of dependents you have and your itemized deductions. This calculator allows from 0 to 99 allowances.
401(k)/403(b) plan withholding: This is the percentage of your gross income you put into a taxable deferred retirement account such as a 401(k) or 403(b). While increasing your retirement account savings does lower your take home pay, it also lowers your federal income tax withholdings. The impact on your paycheck might be less than you think. While your plan may not have a deferral percentage limit, this calculator limits deferrals to 80% to account for FICA (Social Security and Medicare) taxes. Please note that your 401(k) or 403(b) plan contributions may be limited to less than 80 percent of your income. Check with your plan administrator for details. For 2009, the maximum contribution to a 401(k) or 403(b) is $16,500 per year for individuals under 50 and $22,000 for individuals 50 or older.
State and Local Taxes: This is the percentage that will be deducted for state and local taxes. We take your gross pay, minus $3,650 per allowance, times this percentage to calculate your estimated state and local taxes. Please note, this calculator can only estimate your state and local withholdings.
Section 125 Cafeteria Plan expenses per pay period: The amounts that you wish to have deducted from your paycheck each pay period for your Section 125 Cafeteria Plan. The expenses are broken down into four categories. All amounts you enter here are considered pre-tax deductions from your paycheck when you participate in your company's Section 125 Cafeteria Plan. We consider all of these expenses to be ordinary after-tax expenses if you do not participate in your "Section 125 Cafeteria Plan" .
FICA OASDI: FICA Old Age Survivors and Disability Insurance. FICA OASDI is calculated as your gross earnings times 6.2 percent. Please note that this calculator does not make any assumptions as to the total FICA OASDI paid for the current year. For 2009, incomes over $106,800 that have already had the maximum FICA OASDI amount of $6621.60 withheld will not have additional FICA OASDI withholdings.
FICA Medicare: FICA Medicare is calculated as the gross earnings times 1.45 percent. Unlike FICA OASDI there is no annual limit to FICA Medicare deductions.
Federal tax withholding calculations: Federal income tax withholdings were calculated by:

  1. Multiplying taxable gross wages by the number of pay periods per year to compute your annual wage.
  2. Subtracting the value of allowances (for 2009, this is $3,650 multiplied by withholding allowances claimed).
  3. Determining your annual tax by using the tables below (single and married rates, respectively).
  4. Dividing the amount of tax by the number of pay periods per year to arrive at the amount of federal withholding tax to be deducted per pay period.

Single withholding rates*
Annual taxable income between these amounts Annual withholding Withhold additional percentage of income over this amount
$0.00 $2,650.00 $0.00    
$2,650.00 $10,400.00 $0.00 10% $2,650.00
$10,400.00 $35,400.00 $775.00 15% $10,400.00
$35,400.00 $84,300.00 $4,525.00 25% $35,400
$84,300.00 $173,600.00 $16,750.00 28% $84,300.00
$173,600.00 $375,000.00 $41,754.00 33% $173,600.00
$375,000.00 (no limit) $108,216.00 35% $375,000.00
*This information is from IRS Publication 15, Rev. January 2009, for wages paid in 2009.


Married withholding rates*
Annual taxable income between these amounts Annual withholding Withhold additional percentage of income over this amount
$ 0.00 $ 8,000.00 $0.00    
$ 8,000.00 $ 23,950.00 $0.00 10% $ 8,000.00
$ 23,950.00 $75,650.00 $1,595.00 15% $ 23,950.00
$75,650.00 $144,800.00 $9,350.00 25% $75,650.00
$144,800.00 $216,600.00 $26,637.50 28% $144,800.00
$216,600.00 $380,700.00 $46,741.50 33% $216,600.00
$380,700.00 (no limit) $100,894.50 35% $380,700.00
*This information is from IRS Publication 15, Rev. January 2009, for wages paid in 2009.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.


 



 
 
 
 
 
 
 
 
 
 
 
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