Question

Eva received $60,000 in compensation payments from JAZZ Corp. during 2018. Eva incurred $9,500 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 $12,000. Based on these facts answer the following questions: Use Tax Rate Schedule for reference.

2018 Tax Rate Schedules Individuals Schedule X-Single Schedule Z-Head of Household If taxable income But not over: If taxable income is But not over: is over: over 0 $ 9,525 | 10% of taxable income 0 S 13.600 | 10% of taxable income $ 3S,700 | S952.50 plus 12% of $ 51,500 | $1.360 plus 12% of the excess over $9.525 the excess over $ S2.500 | $4,453.50 plus 22% of $ 82.500 $5.944 plus 22% of the excess over S51.800 the excess over S38,700 S 82,500 $157,500 | $14.0S9.50 plus 24% S 82,500 $157.500 | $12.698 plus 24% of the excess over S82,500 of the excess over SS2,500 $157,500 $200.000 | $32.0S9.50 plus 32% $157,500 $200.000 | $30.698 plus 32% of of the excess over the excess over S157,500 $157,500 $200,000 $500.000 | $45.6S9.50 plus 35% $200,000 $500.000 | $44.298 plus 35% of of the excess over the excess over 200,000 $200,000 $500,000 $500,000 $150.689.50 plus 37% of the excess over S500,000 $149.29S plus 37% of the excess over 500,000 Schedule Y-1-Married Filing Jointly or Qualifying Schedule Y-2-Married Filing Separately Wido er If taxable income But not over: The tax is: If taxable income is But not over: is over over 0 $ 19.050 | 10% of taxable income 0 $ 9.525 | 10% of taxable income S 19,050 $ 77.400 | $1,905 plus 12% of $ 3S.700 | $952.50 plus 12% of the excess over S19,050 the excess over $9.525 $165.000 | $8.907 plus 22% of $ 82.500 | $4.453.50 plus 22% of the excess over the excess over $77.400 $165.000 $315.000 | $2S. 179 plus 24% of S 82.,500 $157,500 | $14.0S9.50 plus 24% the excess over of the excess over S165,000 S82,500 $315,000 $400.000 | $64,179 plus 32% of $157,500 $200.000 | $32.0S9.50 plus 32% the excess over of the excess over S315,000 S157,500 $400,000 $600.000 | $91,379 plus 35% of $200,000 $300.000 | $45.6S9.50 plus 35% of the excess over the excess over S400,000 $200,000 $161.379 plus 37% of the excess over 600,000 $600,000 S300,000 $80.6S9.50 plus 37% of the excess over S300,000

a. Assume that Eva is considered to be an employee. What amount of FICA taxes is she required to pay for the year? (Round your final answer to the nearest whole dollar amount.)

Amount of FICA taxes

b. Assume that Eva is considered to be an employee. What is her regular income tax liability for the year? (Round your final answer to 2 decimal places.)

Regular tax liability

Assume that Eva is considered to be a self-employed contractor. What is her self-employment tax liability and additional Medicare tax liability for the year? (Round your intermediate computations & final answer to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Self-employment tax liability
Additional medicare tax liability

d. Assume that Eva is considered to be a self-employed contractor. What is her regular tax liability for the year? (Round your intermediate computations and final answer to the nearest whole dollar amount.)

Regular tax liability

Answer 1

ANSWER:

a)

$3,390. Because Eva’s salary is below the social security wage base limit for 2018, she pays FICA taxes of 5.65% on her entire $60000 (60000*5.65% = 3390)

b)

$6500 as calculated below:

Description	Amount	Explanation
1)salary	60000
2)standard deduction	(12000)	Itemized deductions less than standard deduction.
3)personal exemption	-
4)taxable income	48000	1+2+3
Regular tax liability	6500	(48000-38700)*22%+4453.50[see tax rate schedule for single individual]

c)

Description	Amount	Explanation
1)gross self employment compensation	$60000
2)business expenses	(9500)
3)net self employment income(schedule C)	50500	1+2
4)percentage of self employment income subject to self employment tax	92.35%
5)earnings from self employment	46637	4*5
6)self employment tax rate	13.3%	Eva’s income is below the social security tax compensation limit for 2018 so entire earnings are subject to 13.3%
7)self employment tax liability	6203	5*6

d)

Description	Amount	Explanation
1)gross self employment compensation	60000
2)business expenses	(9500)
3)net self employment income	50500	1+2
4)for AGI deductions for ½ of self employment taxes	3102	6203*50% see answer part c
5)AGI	47398	3+4
6)standard deduction	(12000)
7)personal exemption	-
Taxable income	35398	5+6+7
Regular tax liability	4058	953+(35398-9525)*12%[see tax rate schedule for single individual]