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Required information [The following information applies to the questions displayed below.] Eva received $60,000 in compensation...

Required information [The following information applies to the questions displayed below.] Eva received $60,000 in compensation payments from JAZZ Corp. during 2017. 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 $6,350 and a personal exemption of $4,050. Based on these facts answer the following questions: Use Tax Rate Schedule for reference. (Round your final answer to the nearest whole dollar amount.)

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 a self-employed contractor. What is her self-employment tax liability for the year?

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

Solutions

Expert Solution

Ans 1
FICA tax rate is 7.65% on gross earnings
$60000*7.65% $4,590 ans
Ans 2
Salaries $60,000
Less: Standard deduction -6350
Less: Personal exemption -4050
Taxable Income $49,600
Tax liability
$5226.25+((25%*(49600-37950)) 8139 ans
Ans 3
If self employed
Gross compensation $60,000
Less: business expenses -5000
Net self employment income A $55,000
% of self employment income subject to SE tax B 92.35%
Eranings for self employment C=A*B $50,793
Self employment tax rate D 15.30%
Self employment tax liability C*D $7,771 ans
ans 4
Gross compensation $60,000
Less: business expenses -5000
Net self employment income A $55,000
Less: For AGI deduction 1/2 of SE tax (7771*.5) $3,886
AGI $51,114
Less: Standard deduction -6350
Less: Personal exemption -4050
Taxable Income $40,714
Regular tax liability 5917 ans
$5226.25+((25%*(40714-37950))

ekkarill92 answered 1 year ago
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