Day _20 ACIS3314 Spring 2011 Compensation 1

Day _20 ACIS3314 Spring 2011 Compensation 1 - ACIS 3314 Tax...

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ACIS 3314, Cloyd, Day 20 1 1 ACIS 3314 Tax Impact of Decisions 2 • FICA wage cap • Timing of Employer’s Deduction – 2½ month rule → ―Deferred Compensation‖ – Related-party payee → § 267(a)(2) • Disallowance of Employer’s Deduction – ―Reasonable Compensation‖ – $1 million limit of deductibility of non- performance based ‖ compensation → § 162(m) –Paid on employees wages –FICA (Social Security) tax rate = 6.2% / 4.2% –Medicare tax rate = 1.45% Wage base limitation for Social Security FICA Wage Cap 12-3 Years FICA Rate FICA Wage Cap 1937-1950 1% $ 3,000 1977 4.95% 16,500 1983 5.4% 35,700 2009-2010 6.2% / 4.2% 106,800
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ACIS 3314, Cloyd, Day 20 2 FICA Tax Question • Mike was paid a salary of $70,000 for the current year. How much FICA and Medicare tax does he pay? – Social Security: – Medicare: – Total Taxes: • Assume now that Mike earned $170,000 for the current year. How much FICA and Medicare tax does he pay? – Social Security:
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This note was uploaded on 08/22/2011 for the course ACIS 3314 taught by Professor Hicks during the Spring '09 term at Virginia Tech.

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Day _20 ACIS3314 Spring 2011 Compensation 1 - ACIS 3314 Tax...

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