Question

Eva received $54,000 in compensation payments from JAZZ Corp. during 2018. Eva incurred $6,500 in business expenses relating to her work for JAZZ Corp. JAZZ did not reimburse Eva for any of these expenses. Eva is single and she deducts a standard deduction of $12,000. Based on these facts answer the following questions: Use Tax Rate Schedule for reference.

a. Assume that Eva is considered to be an employee. What amount of FICA taxes is she required to pay for the year?

b. Assume that Eva is considered to be an employee. What is her regular income tax liability for the year? (Round your final answer to 2 decimal places.)

c. Assume that Eva is considered to be a self-employed contractor. What is her self-employment tax liability and additional Medicare tax liability for the year? (Round your intermediate computations & final answer to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

d. Assume that Eva is considered to be a self-employed contractor. What is her regular tax liability for the year? (Round your intermediate computations to the nearest whole dollar amount and round your final answer to 2 decimal places.)

Answer 1

Part A

$54,000 × 7.65% = $4131

Part B

Description	Amount	Explanation
(1) Salary	54000
(2) Standard deduction	(12000)
(3) Taxable income	42000	(1) + (2)
Regular tax liability	5179.50	4453.50 + (22%*(42000-38700))

Part C

Description	Amount	Explanation
(1) Gross self-employment compensation	54000
(2) Business expenses	(6500)
(3) Net self-employment (Schedule C) income	47500	(1) + (2)
(4) Percentage of self-employment income subject to self-employment tax	92.35%
(5) Earnings from self-employment	43866	(3) × (4)
(6) Self-employment tax rate	15.3%
(7) Self-employment tax liability	6711	(5) × (6)

Part D

Description	Amount	Explanation
(1) Gross self-employment compensation	54000
(2) Business expenses	(6500)
(3) Net self-employment (Schedule C) income	47500	(1) + (2)
(4) For AGI deduction for employer portion of self-employment taxes	(3356)	43866 x 7.65%
(5) AGI	44144	(3) – (4)
(6) Standard deduction	12000
(7) Taxable income	32144	(5) – (6)
Regular tax liability	3667	952.50+(12%*(32144-9525))