Question

Malvern Company has a net income in 2013 of $180,000, before considering the $130,000 payments to its owner, Melva Malvern. Melva is married to Jim Malvern, and they do not have any children or other dependents; thus, they qualify for two exemption deductions worth a total of $7,800. Melva and Jim are both 45 years of age. Their itemized deductions for the year total $17,200.

Required:

Determine the following amounts, assuming that Malvern is a self-employed individual. Ignore any federal unemployment tax liability (FUTA), but do consider any allowable expense deductions for the FICA and/or self-employment tax.

Self employment taxes paid           $                         

Federal income taxes paid by Melva and Jim Malvern             $                        

Total taxes paid        $                           

Answer 1

Ans)

Net Income	$180,000
Payment to owner	- 130,000
Income after payment to owner	$ 50,000
Exemption deduction allowed	- 7,800
Deduction for year	- 17,200
Net Income after deductions	$25,000
Self employed taxes paid (15.3%*25,000)	$3,825
Federal income taxes paid by Melva and Jim Malvern($25,000-18,650*15%+10%*18,650=953+186=1139	$1139
Total taxes paid ($3,825+1139= $4,964)	$4,964