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Use the information below to create an Income Statement for the Tudor family. Watkin and Yolandi...

Use the information below to create an Income Statement for the Tudor family.

Watkin and Yolandi combined income is $130,000. Assume their average tax rate including fed/state is 20%. Watkin’s income is $55,000 and Yolandi’s is $75,000. Knowing their individual incomes will allow us to calculate their FICA taxes. (Use the info below to calculate the FICA taxes. Only calculate the employee portion.)

Topic 751 - Social Security and Medicare Withholding Rates

Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as Social Security taxes, and the hospital insurance tax, also known as Medicare taxes. Different rates apply for these taxes.

The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total. Refer to Publication 15, (Circular E), Employer's Tax Guide, for more information; or Publication 51, (Circular A), Agricultural Employer’s Tax Guide, for agricultural employers.

Only the Social Security tax has a wage base limit. The wage base limit is the maximum wage that is subject to the tax for that year. For earnings in 2018, this base is $128,700.

They each save $500 per month. Their mortgage payment is $3,333 per month (PITI), they lease two cars for a total of $6,000 per year and have college loans payments of $120 per month.

Their utilities are roughly $150 a month and they estimate they spent about $210 a week on food. The premiums for their auto insurance totaled to $1600 for the year.

They had some other expenses for 2018 they did not itemize that totaled to $9,670.

Solutions

Expert Solution

ANSWER:-

INCOME STATEMENT FOR THE TUDOR FAMILY
Watkin Yolandi    Total
A Annual Income befor taxes $55,000 $75,000 $130,000
B=0.2*A Fed/State taxes(20%) $11,000 $15,000 $26,000
C=A-B Income after Fed/state taxes $44,000 $60,000 $104,000
FICA:
D=0.062*A
 Social security(6.2%) $3,410 $4,650 $8060
E=0.0145*A Medicare(1.45%) $797.5 $1087.50 $1885
F=D+E Total FICA deduction $4,208 $5737.5 $9945
G=C-F Annual income after taxes $39,793 $54262.2 $94055
EXPENSES:
H Mortgage payment $       39,996 (3333*12)
I Car lease expenses $6,000
J College loan payment $         1,440 (120*12)
K Utilities $1,800 (150*12)
L Food expenses $       10,920 (210*52)
M Auto insurance $1,600
N Other expenses(not itemized) $9,670
P=H+I+J+K+L+M+N Total annual expenses $       71,426
Q=G-P Excess of income over expenses $22629
R Saving s($500 each per month) $6,000 $6,000 $12,000
S=Q-R Amount available $10629

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