Basu owns 100% of an S corporation. This year, the corporation paid Basu a salary of...

Basu owns 100% of an S corporation. This year, the corporation paid Basu a salary of $111,000. Basu's share of S corporation income for the year was $44,400. Assume that this is Basu's only income for the year. Compute any resulting payroll and self-employment income taxes.

Assume the Social Security rate is 6.2% and Medicare rate is 1.45%. If an amount is zero, enter "0". If required, round your answers to nearest dollar.

a. What amount is subject to employee payroll taxes? $
What amount is subject to self-employment taxes? $

b. Compute any resulting payroll and self-employment income taxes.
Basu's payroll taxes: $
Self-employment income taxes: $

Expert Solution

a. Amount subject to employee payroll taxes: $111,000
Amount subject to self-employment taxes: $0

b. Basu's payroll taxes: $111,000 * (6.2%+1.45%) = $8,491.50
Self-employment income taxes: $0

S-corporation shareholders do not have to pay a self-employment tax on their share of the business's profits. This salary will be subject to Social Security and Medicare taxes to be paid half by the employee and half by the corporation

ekkarill92 answered 2 years ago

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