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ADVANCED TAX CHAPTER 4 PROBLEMS SET EXAMS RECENT UPDATE QUESTION AND CORRECT ANSWERS
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ADVANCED TAX CHAPTER 4 PROBLEMS SET EXAMS RECENT UPDATE QUESTION AND CORRECT ANSWERS
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ADVANCED TAX CHAPTER 4 PROBLEMS SET EXAMSRECENT UPDATE QUESTION AND CORRECT ANSWERS
QUESTION: How do you calculate the Self employment Tax/deduction? - ANSWER-(All Earnings x 92.35%
NEFSE x 2.9% Medicare (if over threshold, if under then 15.3%) x (50% for deduction)
QUESTION: What is the wage base limit for Social Security? - ANSWER-160,200 Employee Compensation
What amount do you always start with? - ANSWER-Pretax Earnings
QUESTION: What tax should you determine first? - ANSWER-Entity Level Tax (21%)
QUESTION: How do you calculate distributions? - ANSWER-% of earnings distributed x all earnings
QUESTION: How do you calculate owners tax on distributions - ANSWER-Distribution amount $ x % (0-
15-20)
QUESTION: How do you calculate Ordinary Income Taxable to Owner - ANSWER-Earnings AFTER entity
level tax - SE deduction - QBUID
(NO Ordinary Income for C-Corp, they get distributions)
, QUESTION: Ordinary Income x ----- = Income Tax paid by owner - ANSWER-marginal tax rate
QUESTION: Owner Level Tax = - ANSWER-Income Tax + SE tax + tax on distribution
(Unincorp=Income tax + SE tax_
(C-Corp = Tax on distribution)
QUESTION: Total Tax = - ANSWER-Owner level tax + entity level tax
(Unincorp wont have entity level tax)
(C-corp will have both, owner level tax is their tax on distributions)
QUESTION: After Tax Cash Flow= - ANSWER-Distributions (which would be flow through income to
unincorp) - total tax
QUESTION: Overall Tax Rate = - ANSWER-Total Tax / All earnings
QUESTION: Does an LLC pay tax on distributions? - ANSWER-NO
They pay income tax and SE tax instead
QUESTION: Does a C-Corp pay tax on distributions? - ANSWER-YES
They DON'T pay income tax or SE tax
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