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In: Accounting
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 9 months agoRelated Solutions
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