Cheng is an employee of KaTuk Corporation. He also has his own business working as a caterer. For...

Question:

Cheng is an employee of KaTuk Corporation. He also has his own business working as a caterer. For 2016, Cheng's wages from KaTuk were $198,000. His self-employment income was $34,000.

a. Compute the payroll, self-employment, and additional Medicare taxes for Cheng for 2016.

b. Assume the same facts except that Cheng's 2016 self-employment activities resulted in a loss of $9,000. Compute the payroll, self-employment, and additional Medicare taxes for Cheng for 2016.

c. Compute Cheng's NIIT for 2016 using wages of $198,000, self-employment income of $34,000, and NII of $6,000.

Income Tax:

Income tax is a type of direct tax which is a major source of revenue for the government. The government imposes the income tax on total income generated by an individual during a financial year.

Answer and Explanation: 1

a.

Total payroll income = Salary income + Income from business

Total payroll income = 198,000 + 34,000

Total payroll income = $232,000


b.

Payroll income = Salary income - Loss

Payroll income = 198,000 - 9,000

Payroll income = $189,000


c.

NIIT = Wages + Self-employment income + NII

NIIT = 198,000 + 34,000 + 6,000

NIIT = $238,000


Learn more about this topic:

Loading...
Income Tax: Tax Liability & Deductions

from

Chapter 3 / Lesson 5
9.1K

In this lesson, we'll discuss allowable deductions that reduce taxable income. You'll learn about each deduction and its limitations. We'll also explore how to calculate tax liability after subtracting deductions.


Related to this Question

Explore our homework questions and answers library