Question

Eva received $62,000 in compensation payments from JAZZ Corp. during 2019. Eva incurred $5,000 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 $12,200

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?

C-Assume that Eva is considered to be self-employed. What amount of self-employment taxes is she required to pay for the year?

D-Assume that Eva is considered to be self-employed. What is her regular income tax liability for the year?

Answer 1

A

FICA tax = 62000*7.65% = 4743

B

Regular tax:

Adjusted gross income		$          62,000
Less:
Standard deduction	$          12,200
Itemized deduction	$                   -
Higher of the two		$          12,200
Taxable income		$          49,800
Income tax liability		$       6,814.50
[ 4543 + ( 49800 - 39475 ) × 0.22 ]

C
Self employment tax = (62000-5000) * 92.35% * 15.3% = 8054

D

Particulars	Amount	Amount
Gross income:
Business income	$          57,000
Interest	$                   -
Dividends	$                   -
Capital gains	$                   -
Gross income		$          57,000
For AGI deductions		$            4,027
Adjusted gross income		$          52,973
Less:
Standard deduction	$          12,200
Itemized deduction	$                   -
Higher of the two		$          12,200
Taxable income		$          40,773
Income tax liability		$       4,828.58
[ 4543 + ( 40773.07825 - 39475 ) × 0.22 ]