Mike Barton owns Barton Products,Inc. 00he corporation has 30 employees. Barton
ID: 2371167 • Letter: M
Question
Mike Barton owns Barton Products,Inc. 00he corporation has 30 employees. Barton Corporation expects $800,000.00 o net income before taxes in 2012. Mike is married and files a joint return with his wife, Elaine, who has no earnings of her own. They have one dependent son, Robert, who is 16 yers old.Mike and Elaine have no other income and do not itemize. Mike's salary is $180,000.00 per year (already deducted in computing Barton Corporatin's $500,000.00 net income). Assume that variations in salaries will not efect the US production activities deduction already reflected in taxable income.
1. Should Mike increase his salry from Barton by $50,000.00 to reduce the overall tax burden to himself and Barton? Because of the social security cap, the corporation and ike would incur a 1.45% payroll tax wth the corporate portionbeing deductible.
2. Should Barton employ Mike's wife for $50,000.00 rasther than increase MIke's salary? Take into considertionemployment taxes as well as federal taxes.Note that Elaine's salary would be well below the social security cap, so that she and the corporation each would incur the full amount of payroll taxs with the corporte portion being deductible. In 2012, Elaine's prtion is5.65%, and the corporation's is 7.65%. After 2012, Elaine's portion is 7.65%.
Answer with calculations, reasns, and results.
Explanation / Answer
he should employ his wife......