Hope is a self-employed taxpayer who turns 54 years old at the end of the year...

Hope is a self-employed taxpayer who turns 54 years old at the end of the year (2018). In 2018, her net Schedule C income was $130,000. This was her only source of income. This year, Hope is considering setting up a retirement plan. What is the maximum amount Hope may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. b. She sets up an individual 401(k).

Solutions

Expert Solution

Information Given -

Hope is a self-employed taxpayer who turns 54 years old at the end of the year (2018).

In 2018, her net Schedule C income was $130000. This was her only source of income.

(a) -- She sets up a SEP IRA.

Answer -

As per U.S. Internal Revenue Service, for 2018, a Self-employed persons can contribute up to 20% of their Net self-employment earnings in a SEP IRA, not to exceed the maximum contribution limit of $55000.

In the given case, Hope's contribution to SEP IRA is $24163.

Computed as follows:

A.	20% of Net self-employment earnings - = (Net Schedule C income - Self employed tax deduction ) * 20% = [$130000 - ($130000 * 92.35% * 15.3% * 50%)] * 20% = [$130000 - $9184.2075] * 20% = $24163.	$24163
B.	Maximum contribution limit to SEP IRA, as per U.S. Internal Revenue Service	$55000
Hope's contribution to SEP IRA = Lesser of (A) or (B)		$24163

(b) -- She sets up an individual 401(k).

Answer -

As per U.S. Internal Revenue Service, Contributions to individual 401(k) is limited to the lesser of -

20% of Net earnings from self employment plus $24500; or
The maximum contribution limit of $55000. An Individuals 50 and older can add an extra $6000 per year in "catch-up" contributions, bringing the total to $61000.

In the given case, Hope's contribution to Individual 401(k) = $48663.

Computed as follows:

A.	20% of Net self-employment earnings + $24500 - = [(Net Schedule C income - Self employed tax deduction ) * 20%] + $24500 = [{$130000 - ($130000 * 92.35% * 15.3% * 50%)} * 20%] + $24500 = [($130000 - $9184.2075) * 20%] + $24500 = $24163 + $24500 = $48663	$48663
B.	Maximum contribution limit to Individual 401(k), as per U.S. Internal Revenue Service	$61000
Hope's contribution to Individual 401(k) = Lesser of (A) or (B)		$48663

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2018). In 2018, her net Schedule C income was $288,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. Maximum contribution b. She sets up an individual 401(k). Maximum contribution

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year...

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year (2018). In 2018, his net Schedule C income was $300,000. This was his only source of income. This year, Reggie is considering setting up a retirement plan. What is the maximum amount he may contribute to the self-employed plan in each of the following situations? a. He sets up a SEP IRA. b. He sets up an individual 401(k).

Elvira is a self-employed taxpayer who turns 42 years old at the end of the year...

Elvira is a self-employed taxpayer who turns 42 years old at the end of the year (2019). In 2019, her net Schedule C income was $130,000. This was her only source of income. This year, Elvira is considering setting up a retirement plan. What is the maximum amount Elvira may contribute to the self-employed plan in each of the following situations? (Round your intermediate calculations and final answers to the nearest whole dollar amount.) Problem 13-77 Part a a. She...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2018). In 2018, her net Schedule C income was $282,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. Maximum contribution _______________? b. She sets up an individual 401(k). Maximum Contribution...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year...

Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2018). In 2018, her net Schedule C income was $268,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? a. She sets up a SEP IRA. b.. She sets up an individual 401(k).

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year...

Reggie is a self-employed taxpayer who turns 59 years old at the end of the year (2017). In 2017, his net Schedule C income was $316,000. This was his only source of income. This year, Reggie is considering setting up a retirement plan. What is the maximum amount he may contribute to the self-employed plan in each of the following situations? a. He sets up a SEP IRA. b. He sets up an individual 401(k).

During the year 2019, Ricki, who is not self-employed and does not receive employer reimbursement for...

During the year 2019, Ricki, who is not self-employed and does not receive employer reimbursement for business expenses, drove her car 5,600 miles to visit clients, 10,600 miles to get to her office, and 500 miles to attend business-related seminars. All of this mileage was incurred ratably throughout the year. She spent $390 for airfare to another business seminar and $230 for parking at her office. Using the automobile expense rates in effect for 2019, what is her deductible transportation...

Smithers is a self-employed individual who earns $33,000 per year in self-employment income. Smithers pays $2,100...

Smithers is a self-employed individual who earns $33,000 per year in self-employment income. Smithers pays $2,100 in annual health insurance premiums (not through an exchange) for his own medical care. In each of the following situations, determine the amount of the deductible health insurance premium for Smithers before any AGI limitation. a. Smithers is single and the self-employment income is his only source of income. b. Smithers is single, but besides being self-employed, Smithers is also employed part-time by SF...

please calculate the 2020 tax liability for a single taxpayer who is 40 years old with...

please calculate the 2020 tax liability for a single taxpayer who is 40 years old with $212,400 of wages, $20,000 of qualified dividends, $30,000 of LT capital gains and $50,000 of ST capital gains. Please make sure to consider all possible taxes in your calculation, please show all work/ calculations

A 54-year-old woman who has a history of COPD presents with a productive cough for the...

A 54-year-old woman who has a history of COPD presents with a productive cough for the last 3 months and shortness of breath with little exertion. Her blood pressure is 130/90 mm Hg and pulse rate 126 bpm. Arterial blood gas results are as follows: pH 7.29; PaCO2 72 mm Hg; HCO3– 34 mEq/L; PaO2 50 mm Hg. How do you interpret the patient’s blood gas values? What treatment would you anticipate? Outline the nursing plan of care to address...

Subjects