Question

When must taxpayers make quarterly estimated tax payments? 2.Discuss the rationale for a maximum wage base for Social Security and no maximum for Medicare. Should there be a maximum base for Social Security and Medicare? 3.What are the general rules for qualified retirement plans? Discuss different types of qualified plans.

Answer 1

1) If you make money outside of a traditional job (i.e.,) a sole proprietor or some other miscellaneous income then you’ll be responsible for paying all your own taxes. Self-employed people seldom pay advance taxes, also known as estimated tax payments. You will be required to estimate and pay tax if you think you’ll owe $1,000 or more to IRS. For sole proprietors, estimated taxes are due in mid-April, mid-June, mid-September, and mid-January. If you are on a company’s payroll, you usually don’t have to worry about taxes until the first few months of the following year and in case you have income other than salaries you also have the option to increase the withholding tax with your employer to avoid payment of estimated tax.

2) Well, it is an accepted theory that there is a maximum social security benefit which you get which is nothing but an assured sum to maintain a decent lifestyle. However, Medicare needs vary from person to person and hence, there is no cap on the benefit under Medicare.

The argument for the existence of a cap in the first place is that Social Security is not a welfare program but an insurance system; it just happens to be run by the government. Just for example, If the cap were removed, it would be just another government benefit and not a program in which the beneficiaries earn their income fair-and-square.

3) The types of qualified plans that you would have heard about are profit sharing plans including 401(k) and 403(b) plans. Other common types of qualified plans include defined benefit plans and money purchase pension plans.

For 2018, the maximum allowable contribution to a defined-contribution plan is the lesser of $55,000 ($61,000 if age 50+) or 100 percent of compensation. The maximum annual compensation of each employee that can be taken into account under a plan for any year must not exceed $275,000 for 2018 and is subject to cost-of-living adjustments in later years.