Should pay (3500-800)×20%=2700×20%=540 yuan.

2. When Mr. Chen receives the payment of 4,200 yuan, the tax payable by Mr. Chen is (4,000-800) × 20%+(4,200-4,000) × 30% = 3,200 × 20%+200 × 30% = 640+60 = 700 yuan.

So Mr. Chen's after-tax income is 4200-700=3500 yuan.