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Bob is a 50 percent owner of Barco Enterprises. During 2017, Barco earned $80,000 in net...

Bob is a 50 percent owner of Barco Enterprises. During 2017, Barco earned $80,000 in net income after subtracting Bob’s $50,000 salary. Bob also withdrew $20,000 from Barco during the year. Bob would like to know the amount of the FICA taxes and by whom they would be paid if;

  1. Barco is a general partnership
  2. Barco is an S Corporation

Solutions

Expert Solution

case a:

self employed individuals like partners, sole proprietors, will be responsible to pay self employment tax.

he earned $ 40,000 as a partner from Barco in addition to his $ 50,000 salary. his $ 90,000 total income will be subject to FICA. he will be responsible for $ 11,054.30 ($ 90,000 * 92.35% * 13.3%).

case b:

S Corporation is not subject to any tax including self employment tax. Each partner will be responsible from his/her share of FICA taxes on $ 50,000 salary.

ekkarill92 answered 2 years ago
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