Foster owns 27% of the Baxter Corporation,whose ordinary income is $100,000.His salary for the year is $50,000.What amount must Foster pay in Social Security taxes if Baxter is a(n)

Corporation S Corporation

Question

Foster owns 27% of the Baxter Corporation,whose ordinary income is $100,000.His salary for the year is $50,000.What amount must Foster pay in Social Security taxes if Baxter is a(n)
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Corporation S Corporation

Quizplus · Accepted Answer

Foster's salary is subject to Social Security taxes regardless of the corporation type. The Social Security tax rate is 7.65% (6.2% for Social Security and 1.45% for Medicare) on the first $132,900 of income (as of 2023). Therefore, $50,000 * 7.65% = $3,825 in Social Security taxes for both corporation types.

Foster Owns 27% of the Baxter Corporation,whose Ordinary Income Is