Bill owns 100% of an S corporation. This year, the corporation paid Bill a salar
ID: 2599718 • Letter: B
Question
Bill owns 100% of an S corporation. This year, the corporation paid Bill a salary of $101,000. Bill's share of S corporation income for the year was $40,400. Assuming this is Bill's only income for the year. Assume the Social Security rate is 6.2% and Medicare rate is 1.45%. If an amount is zero, enter "0", if required, round your answers to nearest dollar. a. What amount that Bill received is subject to payroll taxes? To selif-employment taxes? b. Compute Bill's payroll and self-employment income taxes. Bill's Self-employment income taxes: payroll taxesExplanation / Answer
a.) what amount that bill received is subject to payroll taxes? $40,400
S corporation act as a pas through entity. corporation iis not taxed income or loss pas through shareholder's. Therefore Bill as an owmer is liable for the payroll taxes from the income he earned through corporation.
self- employement taxes: $101,000
b.) bill's payroll taxes: Social security tax=6.2%, 40,400*6.2%=2,504.8
40,400-2,504.8= 37,895.2*1.45%=549.48
total tax= 2,504.8+549.48= 3,054.28
income tax= $18,481.25 plus 28% of the amount over $90,750= 101,000-18,481.25= 82,518.75*.28= 20,629.69
final income tax= 18,481.25+20,629.69=39,110.9375.
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