MDC chapter 11

Based on IRS regulations, there is a difference in the type of employment for employees and

Her August paycheck stub indicated that she pays $800.00 in Federal Income Taxes, $230.64 in Social Security

Claimed as Dependent on someone’s return: may claim a standard deduction equal to the greater of 1) $1000 or 2) person’s earned income plus $350 up to standard deduction amnt of $6200 (for single individual)

will be taxed the same way as ordinary income in the W-2 form, and if it is a business income

20. (p. 86) All citizens of the United States are required to file a federal income tax return if their income falls below a certain level.

Payroll taxes do not need to be deducted for independent contractors, putting the onus on the contractor to perform such duties for his or

* Gross Income Test: The individual’s gross income for the calendar year in which the taxpayer’s tax year begins must be less than the exemption amount for the year, $3,800 for 2012.

Total taxes are a requirement for the form along with total deposits for the period. If there is a difference between the amount of taxes due and total payments, the outstanding balance has to be settled.

Government withholding is the tax that is withheld based on your pay and your status. Government pay charge is ascertained considering the quantity of remittances a worker guarantees on W-4 and in addition their gross pay. The more withholding stipend an employee claims, the less wage charges a business withhold from the workers check. Federal income taxes are used towards transportation, education, and the military. For state tax charge, each state has its own wage impose structure. The sum every individual owes is computed is grounded on W-4,

The tax rate varies by income and deductions. In 2016, the tax rate varied from 10% to 39.6%. Employers are then responsible for submitting the employee taxes to the IRS according to the IRS deposit schedule. In addition, the employer must file forms 941 and W-3 and providing employees with their W-2 forms each year.

Payroll taxes are the taxes imposed on employees and employers. They require the employer to withhold earnings on behalf of their employees. The required payroll taxes typically include FICA taxes, such as Social Security and Medicare, and Unemployment taxes at both the State and Federal level (SUTA and FUTA).

Payroll taxes are the federal tax and the state tax contributed by the employer and employee to finance health care, pension, benefits for disability and compensation for the injured employee. Pay roll tax falls under two categories: one deduction from the employee’s wage and another is based on employee’s wage paid by the employer. In the first kind of payroll tax, employer reserve certain fraction of their employee’s earning’s. It is also known as pay as you go tax (PAYG) or pay as you earn tax (PAYE). One the other hand, in the second kind the employer’s pays the tax from his/her own fund and is directly related to employing a worker. The sum paid by the employer normally covers the employer’s finance of the social security system, Medicare, and other insurance programs. The US government charges two distinct payroll taxes in labor wage. The first tax is a 12.4 percent to fund the social security in which the first dollar an individual earns in income up to a cap of $117,000 in 2014. Each year the cap is adjusted to the change in the wage. Both the employer and employees share the equal burden in the tax i.e. 50 percent from each side out of total 12.4 percent. The second tax funds the Medicare which is 2.9 percent payroll tax and is also levied from the first dollar of income but has no cap. This tax is also divided equally between employers and

Breaking down self-employment tax can be classified into two realms. First being in the form of an individual’s income derived by their trade or business and the second being the income or loss by the individual’s partnership of said trade or business. This self employment tax is levied on income in excess of $400 and is in exclusion of real estate rentals, dividends, interest, capital gains tax,

Individuals classify salary as money received every payday, however, the term is slightly different for business owners. Business owners are customarily compensated based on which business entity is elected. Business owners of sole proprietorships and partnerships are not entitled to actual salaries, but they receive profit distributions from business operations. Profits from a partnership are further divided up based on each partner’s percentage ownership. They are not responsible for paying the FICA tax, but they need to pay self-employment taxes and quarterly estimated taxes. Business owners of C and S corporations are compensated in one of two ways: salaries or dividends as a shareholder. In addition to receiving a reasonable salary, payment of Social Security and Medicare taxes are expected. Business owners prefer to be compensated with cash salaries, dividends, or distributions (How Business Owners are Paid by the Business 2016).

For purposes of getting a mortgage loan application approved, lenders have generally accepted guidelines as to who is self-employed and who is not. Specifically, if a borrower receives W2 wages from an employer, that individual is not self-employed. For someone that earns than 25 percent of their annual income from a business, commissions or bonuses, the self-employed moniker applies, or at least the lender evaluates an application in such a manner.