Elvira is a self-employed taxpayer who turns 42 years old at the end of the year...

Elvira is a self-employed taxpayer who turns 42 years old at the end of the year (2019). In 2019, her net Schedule C income was $130,000. This was her only source of income. This year, Elvira is considering setting up a retirement plan. What is the maximum amount Elvira may contribute to the self-employed plan in each of the following situations? (Round your intermediate calculations and final answers to the nearest whole dollar amount.) Problem 13-77 Part a a. She sets up a SEP IRA.

Expert Solution

SEP-IRA stands for Simplified Employee Pension Individual Retirement Arrangement. Self employed people can invest in SEPs to fund their retirement. A self employed person can contribute a maximum of $56,000 in 2019 subject to a limitation of 20% of the net business income. Net business income means gross business revenue less all business expenses.

In 2019, Elvira's net business income is $130,000. The self employment tax is 15.3% of the net business income. As we can deduct 50% of the self employment tax i.e. 7.65% from AGI, hence the net deductible should be 7.65%. Alternatively we can also say that 92.35% (100% - 7.65%) of net business income is the net business income for calculating the 20% limit. In this case her Net business income = 20% of $130,000 = $26,000 which is less than the maximum limit of $56,000. Hence she can invest maximum of lower of the above two i.e. $26,000.

If she sets up a SEP IRA in 2019, she can invest upto $26,000.

ekkarill92 answered 2 years ago

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2018). In 2018, her net Schedule C income was $288,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. Maximum contribution b. She sets up an individual 401(k). Maximum contribution

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year...

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year (2018). In 2018, his net Schedule C income was $300,000. This was his only source of income. This year, Reggie is considering setting up a retirement plan. What is the maximum amount he may contribute to the self-employed plan in each of the following situations? a. He sets up a SEP IRA. b. He sets up an individual 401(k).

Hope is a self-employed taxpayer who turns 54 years old at the end of the year...

Hope is a self-employed taxpayer who turns 54 years old at the end of the year (2018). In 2018, her net Schedule C income was $130,000. This was her only source of income. This year, Hope is considering setting up a retirement plan. What is the maximum amount Hope may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. b. She sets up an individual 401(k).

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2018). In 2018, her net Schedule C income was $282,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. Maximum contribution _______________? b. She sets up an individual 401(k). Maximum Contribution...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2018). In 2018, her net Schedule C income was $268,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. b.. She sets up an individual 401(k).

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year...

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year (2017). In 2017, his net Schedule C income was $316,000. This was his only source of income. This year, Reggie is considering setting up a retirement plan. What is the maximum amount he may contribute to the self-employed plan in each of the following situations? a. He sets up a SEP IRA. b. He sets up an individual 401(k).

During the year 2019, Ricki, who is not self-employed and does not receive employer reimbursement for...

During the year 2019, Ricki, who is not self-employed and does not receive employer reimbursement for business expenses, drove her car 5,600 miles to visit clients, 10,600 miles to get to her office, and 500 miles to attend business-related seminars. All of this mileage was incurred ratably throughout the year. She spent $390 for airfare to another business seminar and $230 for parking at her office. Using the automobile expense rates in effect for 2019, what is her deductible transportation...

Smithers is a self-employed individual who earns $33,000 per year in self-employment income. Smithers pays $2,100...

Smithers is a self-employed individual who earns $33,000 per year in self-employment income. Smithers pays $2,100 in annual health insurance premiums (not through an exchange) for his own medical care. In each of the following situations, determine the amount of the deductible health insurance premium for Smithers before any AGI limitation. a. Smithers is single and the self-employment income is his only source of income. b. Smithers is single, but besides being self-employed, Smithers is also employed part-time by SF...

please calculate the 2020 tax liability for a single taxpayer who is 40 years old with...

please calculate the 2020 tax liability for a single taxpayer who is 40 years old with $212,400 of wages, $20,000 of qualified dividends, $30,000 of LT capital gains and $50,000 of ST capital gains. Please make sure to consider all possible taxes in your calculation, please show all work/ calculations

Becky, 25 years old, is a single taxpayer who uses the standard deduction. Her AGI is...

Becky, 25 years old, is a single taxpayer who uses the standard deduction. Her AGI is $61,000. After she finished her accounting degree at Minnesota, she decided to enroll in a local community college to take one class in art history as a part time student. The cost of the course was $1500. Compute the amount of education tax credits available to her in 2020 and specify the name of the tax credit that she is eligible for.

Question

Elvira is a self-employed taxpayer who turns 42 years old at the end of the year...

Solutions

Expert Solution

Related Solutions

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year...

Hope is a self-employed taxpayer who turns 54 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year...

During the year 2019, Ricki, who is not self-employed and does not receive employer reimbursement for...

Smithers is a self-employed individual who earns $33,000 per year in self-employment income. Smithers pays $2,100...

please calculate the 2020 tax liability for a single taxpayer who is 40 years old with...

Becky, 25 years old, is a single taxpayer who uses the standard deduction. Her AGI is...