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Essay / Research Paper Abstract
This 3 page paper looks at a scheme suggesting that advance payments are made to an employee in order to reduce the liability to the social security tax under the Federal Insurance Contribution Act (FICA). The bibliography cites 1 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEsoctax.rtf
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Unformatted sample text from the term paper:
security tax liability. Mr. Whit is the CEO of newly incorporated Talawanda Concepts with a salary of $100,000. As sole shareholder he has the controlling interest. Mr. Whit want to
avoid payment of social security tax every other year by inflating his year one salary and taking no salary in year two, then repeating this cycle. As a CEO he
is an employee so this is foreseen as saving the company social security tax payments as well. The second years wage would be paid at the end of year one
and funded with a bank loan, which would be repaid in year two. There is no dispute over the classification of Mr. Whit as an employee. This is an issue
that needs t be considered under tax law and with reference to the Federal Insurance Contribution Act (FICA) and also Publication 15a Employers Supplemental Tax Guide (Supplement to Circular E,
Employers Tax Guide (Publication 15)). The social security tax for employees is payable in 2003 at a rate of 6.2% of wages up to an upper limit which rises each
year. In 2003 this limit was $87,000. The employer has t match the same amount of tax paid and is also limited by the same ceiling, The employer is under
an obligation to withhold this tax from an employees wages until the wage level is reached under that employment in that year. This is with held along with the Medicare
tax which doe not have an upper limit on earnings. There are certain organisations that are exempt form the social security tax, but Mr Whit does not appear to be
in any of these, so this will not be considered any further. The key to consider here is if under the legislation he will be able to save the
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