Final answer:
Jane is taxed on her earnings from her father's business, as the IRS views her earned income as her own. This income will be reported on her individual income tax return. Ricardo would be responsible for self-employment taxes if his business were not incorporated, while Jane would have standard payroll taxes deducted from her wages.
Step-by-step explanation:
Jane's earnings from her work at her father Ricardo's business are subject to individual income tax and will be taxed to her, not her father. This is because the Internal Revenue Service (IRS) views earned income as belonging to the individual who performed the work. As long as Jane has performed legitimate work and received a fair market wage, the $3,000 she earned is her income and it will be up to her to report this income on her own tax return.
In the context of employment taxes, if Ricardo's business were not incorporated, he would be subject to self-employment taxes, which would include both the employer and employee portion of Social Security and Medicare taxes. As for Jane, since she is an employee of her father's business, standard payroll taxes would be deducted from her wages, including her share of Social Security and Medicare taxes.
The Social Security tax is generally considered to be a regressive tax because it is a flat percentage (6.2%) on income up to a certain limit ($113,000), meaning that those with higher incomes pay a smaller percentage of their total income in Social Security taxes than those with lower incomes.