The amount that Ringo must pay includes:
- a. Excise Tax: $163.80
- b. Property Tax: $270.00
1. Computation of the Excise Tax.
The Net Income from Music Business = Revenue - Supplies Expense - Vehicle Expense
= $8,400 - $150 - $60
= $8,190
The amount of Excise Tax = 2% of Net Income
= 0.02 * $8,190
= $163.80
2. Computaion of the Property Tax.
The property Value = Value of Vehicle + Value of Instruments
= $6,000 + $3,000
= $9,000
The amount of the Property Tax = 3% of Property Value
= 0.03 * $9,000
= $270.00.
The complete question is:
Your friend, Ringo, performs music in addition to his regular job as an accountant at Amazon. His financial records for this side business include the following: Receipts from clients (Revenue): $8,400 Supplies Expense: $150 Vehicle Expense: $60 Value of vehicle: $6,000 Value of instruments: $3,000 Ringo has licensed his business with the state as a Limited Liability Company. He is required to pay excise tax(2% of net income) and property tax(3% of property value) in addition to additional federal income tax resulting from the net income Ringo has licensed his business with the state as a Limited Liability Company. He is required to pay excise tax ( 2% of net income) and property tax ( 3% of property value) in addition to additional federal income tax resulting from the net income of his music business listed on Schedule C. He is also liable for Self-employment tax at the rate of 15.3% of the net income reported on his Schedule C. If Ringo's marginal income tax rate (the amount charged for the net income reported on Schedule C) is 18%, how much must he pay in the various taxes listed? a. Excise tax b. Property tax