You have set up your tax preparation firm as an incorporated business. You took $79,000 from the firm as your salary. The firm's taxable income for the year (net of your salary) was $30,200. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3.6. a. How much tax must be paid to the federal government, including both your personal taxes and the firm's taxes? (Round your answer to 2 decimal places.) Total taxes b. By how much will you reduce the total tax bill if you cut your salary to $54,600, thereby leaving the firm with taxable income of $54,600? (Round your intermediate calculations and final answers to the nearest whole dollar amount.) Tax reduction c. What allocation will minimize the total tax bill? Hint: Think about marginal tax rates and the ability to shift income from a higher marginal bracket to a lower one. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) Amount of salary to be paid yourself to minimize the tax bill

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.