Module 3: Analyzing the Financial Data

Question 1

Randy is paid monthly and has a gross pay of $12,500. On Schedule A—Itemized Deductions of his tax return, he lists deductions of $6,397 for state and local taxes, $2,200 for real estate taxes, $5,000 towards the principal on his home mortgage, and $7,800 for interest paid on his home mortgage. In addition, he has contributed $16,500 from his gross income to his 401(k). What are Randy’s total itemized deductions?

A) $37,897
B) $21,397
C) $32,897
D) $16,397

Answer 1

D) $16,397

Randy’s 401(k) contributions and payment on mortgage principal are not itemized deductions.

Question 2

Tom is paid every other week and has a gross salary of $1,800. His deductions include a federal tax deduction of $201, state tax deduction of $77, Social Security deduction of $111.60, and Medicare deduction of $26.10. Assuming Tom’s federal and state tax deductions are correct, what is Tom’s net monthly income?

Answer 2

$2,999.32

The net income was calculated as if Tom was paid twice a month with 24 pay periods, but he has 26 pay periods. His deductions for the period total $415.70, leaving a net income of $1,384.30. $1,384.30 multiplied by 26 then divided by 12 equals $2,999.32.

Question 3

Doug’s gross wages are $360,000 per year, and he is paid monthly. If he multiples his withholding from his January 31 paycheck by 12 to calculate the annual deductions, why would these calculations be wrong?

Answer 3

Since Doug’s wages are over the Social Security tax wage limit of $142,800, his deductions will be overstated.

Question 4

What is the key document that is used to collect financial data pursuant to a divorce?

Answer 4

The key document used to collect financial data is usually called a Financial Affidavit.

Question 5

Marsha is paid monthly and her paystub shows gross pay of $12,000. Her payroll deductions are listed as $2,280 for federal tax, $450 for state tax, $744 for Social Security, $174 for Medicare, $1,375 for her 401(k), and $500 to buy U.S. savings bonds. Assume that Marsha’s federal and state taxes are correct. What should she report as her monthly net take-home pay on her financial affidavit?

Answer 5

$8,352

Marsha’s 401(k) contributions and savings bond purchases are not included in her take-home pay. Her income that is subject to Social Security is limited to $168,600. See the calculations below.

Question 6

Buddy earns $17,660 per month with take-home pay of $14,600 per month. His wife Selena is asking for $6,900 per month in combined child support and spousal support because that is her actual budget for herself and their three small children. If Selena is your client, which of the following actions should you take for her?

Answer 6

A CDFA professional’s role is to take the information provided by his or her clients and their attorneys, analyze the proposals, and then show them the results. In this case, the CDFA professional should show Selena the financial impact of the support that she is requesting.

Question 7

What expense is LEAST likely to be double counted?

A) Mortgage payments
B) Health insurance
C) Property insurance
C) Property taxes

Answer 7

Mortgage payments are not typically double counted.

Question 8

What is Medicaid withholding and is there a limit?

Answer 8

All wages are subject to Medicare tax at a rate of 1.45%

Question 9

What payroll deductions needs to be added back to net income to calculate take-home pay?

Answer 9

401(k) contributions and other voluntary savings programs.