Question

Bob is a 50 percent owner of Barco Enterprises. During 2017, Barco earned $80,000 in netincome after subtracting Bob’s $50,000 salary. Bob also withdrew $20,000 from Barco duringthe year. Bob would like to know the amount of the FICA taxes and by whom they would bepaid if;

a. Barco is a general partnership.

b. Barco is an S corporation​.

Answer 1

(a): Self employed individuals like partners, sole proprietors, managing member of LLC’s will be responsible to pay Self-employment tax. He earned $40,000($80000×50%) as a partner from Barco in addition to his $50,000 salary. His $90,000 total income will be subject to FICA.

He will be responsible for $12717 ($90000×92.35% × 15.3%)

(b): S Corporation is not subject to any tax including Self-employment tax. Each partner will be responsible from his/her share of FICA taxes on the $50,000 salary.