Problem 6-17 (Algorithmic) The Nanny Tax (LO 6.7)

Sally hires a maid to work in her home for $900 per month. The maid is 25 years old and not related to Sally. During 2020, the maid worked 8 months for Sally.

Do not round immediate computations and round your final answers to two decimal places.

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?

Sally's employer's Medicare tax: $__________________

c. What is the amount of Social Security and Medicare tax which must be withheld from the maid's wages?

Sally should withhold for Social Security and Medicare tax of: $________________

Problem 6-18 The Nanny Tax (LO 6.7)

Ann hires a nanny to watch her two children while she works at a local hospital. She pays the 19-year-old nanny $180 per week for 42 weeks during the current year.

Do not round immediate computations and round your final answers to two decimal places.

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 2020? $____________________

b. What is the nanny's portion of the Social Security and Medicare tax? $____________________

Problem 6-19 (Algorithmic) Special Rules for High-Income Taxpayers (LO 6.8)

Rachel is single and has wages of $169,250 and dividend income of $101,550. She has no investment expenses.

Calculate the amount of the 3.8 percent net investment income tax she must pay. Round your answer to the nearest whole dollar. $________________

Problem 6-20 (Algorithmic) Computing the 0.9 Percent Medicare Tax for High-Income Taxpayers (LO 6.8)

Married taxpayers Otto and Ruth are both self-employed and file a joint return. Otto earns $463,800 of self-employment income and Ruth has a self-employment loss of $31,900.

How much 0.9 percent Medicare tax for high-income taxpayers will Otto and Ruth have to pay with their 2020 income tax return?

If required, round your final answer to nearest dollar. $____________________