Whittenburg Gerald E., Altus-Buller Martha. Income Tax Fundamentals
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Questions and Problems 9-37
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9-38 Chapter 9
Withholding, Estimated Payments, and Payroll Taxes
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Questions and Problems 9-39
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9-40 Chapter 9
Withholding, Estimated Payments, and Payroll Taxes
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Questions and Problems 9-41
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9-42 Chapter 9
Withholding, Estimated Payments, and Payroll Taxes
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b. In what ways may the restaurant allocate the tip income to the employees?
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LO 9.2 5. Harold Conners (Social Security number 785-23-9873) lives at 13234 DeMilo Drive,
Houston, TX 77052, and is self-employed for 2010. Harold estimates his required
annual estimated tax payment for 2010 to be $6,544. Harold had a $674 overpayment
of last year’s taxes, which he will apply against his first quarter estimated payment.
Complete the first quarter voucher below for Harold for 2010.
LO 9.3 6. For each of the following payments, indicate the form that should be used to report the
payment.
a. Interest of $400 paid by a bank ____________
b. Payment of $400 in dividends by a corporation to a shareholder ____________
c. Periodic payments from a retirement plan ____________
d. Salary as president of the company ____________
e. Las Vegas Black Jack winnings of $25,000 ____________
LO 9.3 7. General Corporation (P.O. Box 4563, Houston, TX 77003; EIN 12-3456789) paid
Louise Bryant, an employee who lives at 5471 DeMilo, Houston, TX 77052, wages
of $24,554 in 2010. The withholding tax for the year amounted to $6,050.40, and
the FICA tax withheld was $1, 878.38 ($1 ,522.35 for Social Security and $356.03 for
Medicare). Louise’s FICA wages were the same as her total wages. Her Social Security
number is 545-64-7745.
a. Complete the Form W-2 on the next page for Louise Bryant from General
Corporation.
b. General Corporation also paid $900 to William Russel for presenting a manage-
ment sem inar. William lives at 1455 Cullen Boulevard, Houston, TX 77008, and
his Social Security number is 475-45-3226. Complete the following Form 1099-
MISC for the payment to William from General Corporation.
Questions and Problems 9-43
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
LO 9.3 8. Jenny earns $34,500 in 2010. Calculate the FICA tax that must be paid by:
Jenny: Soc. Sec. $ ____________
Medicare $ ____________
Jenny’s Employer: Soc. Sec. $ ____________
Medicare $ ____________
Total FICA Tax $ ____________
LO 9.3 9. Yolanda earns $107,000 in 2010. Calculate the FICA tax that must be paid by:
Yolanda: Soc. Sec. $ ____________
Medicare $ ____________
9-44 Chapter 9
Withholding, Estimated Payments, and Payroll Taxes
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Yolanda’s Employer: Soc. Sec. $ ____________
Medicare $ ____________
Total FICA Tax $ ____________
LO 9.3 10. Jan has two jobs during 2010. One employer withheld and paid FICA taxes on $66,600
of Jan’s salary, and the other employer withheld and paid FICA taxes on $44,400 in sal-
ary paid to Jan. Calculate the amount of Jan’s overpayment of FICA taxes that he should
claim on his 2010 Form 1040.
$ ____________
LO 9.4 11. Stew is a self-employed surfboard maker in 2010. His Schedule C net income is $104,000
for the year. He also has a part-time job and earns $8,500 in wages subject to FICA taxes.
Calculate Stew’s self-employment tax for 2010 using Schedule SE on pages 9-47 and 9-48.
LO 9.5 12. Thomas is an employer with one employee, Sarah. Sarah’s wages during 2010 are
$19,450, and the state unemployment tax rate is 5.4 percent. Calculate the following
amounts for Thomas:
a. FUTA tax before the state tax credit $ _____________
b. State unemployment tax $ _____________
c. FUTA tax after the state tax credit $ _____________
LO 9.6 13. Sally hires a maid to work in her home for $250 per month. The maid is 25 years old
and not related to Sally. During 2010, the maid worked 10 months for Sally.
a. What is the amount of Social Security tax Sally must pay as the maid’s employer?
$ ____________
b. What is the amount of Medicare tax Sally must pay as the maid’s employer?
$ ____________
c. What is the amount of Social Security and Medicare tax which must be withheld
from the maid’s wages?
$ ____________
LO 9.6 14. Ann hires a nanny to watch her two children whi le she works at a local hospital. She
pays the 19-year-old nanny $125 per week for 48 week s during the current year.
a. What is the employer’s portion of Social Security and Medicare tax for the nanny
that Ann should pay when she files her Form 1040 for 2010?
$ ____________
b. What is the nanny’s portion of the FICA and Medicare tax?
$ ____________
LO 9.2 15. Go to the IRS Web site (www.irs.gov) and redo Problem 5 (Chapter 9, Group 2) using
the most recent interactive ‘‘Fill-in Forms’’ Form 1040-ES. Print out the completed Form
1040-ES.
LO 9.3 16. Fly-By-Night (P.O. Box 1234, Dallas, TX 75221, EIN 12-9876543) paid George Smith,
an employee who lives at 432 Second Street, Garland, TX 75040, wages of $24,300. The
income tax withholding amounted to $5,320 and the FICA tax was $1,858.95 ($1,506.60
for Social Security and $352.35 for Medicare). George’s FICA wages were the same as
the total wages, and his Social Security number is 466-47-3313. Fly-By-Night’s owner, a
shady character, took off to South America with all the firm’s funds, and did not file the
required W-2s, etc. for George (and other employees). The above numbers are taken
from the year-to-date section of George’s last pay stub.
Go to the IRS Web site (www.irs.gov) and complete a Substitute W-2 using the
most recent interactive ‘‘Fill-in Forms’’ Form 4852. Print out the completed Form 4852.
Questions and Problems 9-45
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
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GROUP 3:
COMPREHENSIVE PROBLEM
.............................................. .............................................. .
1. Carol Harris, Ph.D, CPA, is a single taxpayer and she lives at 674 Yankee Street,
Durham, NC 27409. Her Social Security number is 793-52-4335. Carol is an Associ-
ate Professor of Accounting at a local college. Carol’s earnings and withholding from
the college for 2010 are:
Earnings from the college $54,000
Federal income tax withheld 8,800
State income tax withheld 2,500
FICA tax of $3,348 and Medicare tax of $783 were also withheld from Carol’s earn-
ings. Carol’s other income includes interest of $145 from a savings account at New
England Bank and $450 of qualified dividends from Microsoft.
During the year, Carol paid the following amounts (all of which can be sub-
stantiated):
Home mortgage interest $6,300
Visa card interest 350
Auto insurance 750
Property taxes on personal residence 2,650
Other medical expenses 810
Charitable contributions (in cash) 1,000
Carol had the following stock market transactions:
Stock Acquired Sold Price Basis
Trout Co. 04/05/03 10/15/10 $6,000 $3,600
Bass Co. 02/01/ 10 08/03/10 $7,000 $5,500
Shark Co. 09/12/04 10/15/10 $7,000 $8,500
In addition to being a professor at the local college, Carol maintains a CPA prac-
tice. Income and expenses from this activity are:
Fees from CPA practice $38,800
Office rent 3,600
Supplies 750
Computer tax service 1,200
Mileage (4,600 miles) 2,300
Client meals and entertainment 2,740
Telephone 975
Other expenses 1,400
Carol drove her car 20,000 miles in total, of which 5,000 miles were for commuting.
Carol made 2010 estimated tax payments to the U.S. Treasury of $3,000 for each quarter.
Required: Complete Carol’s federal tax return for 2010. Use Form 1040, Schedule A,
Schedule C, Schedule D, Schedule SE, Schedule M, and the worksheet on pages 9-49
through 9-60 to complete this tax return. Make realistic assumptions about any
missing data.
9-46 Chapter 9
Withholding, Estimated Payments, and Payroll Taxes
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.