question 16 **Self-Employment Retirement Contribution Example**Kathy is 48 years old and self-employed. During 2023, she reported $522,000 in revenues and $104,400 in expenses related to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k)?**Multiple Choice Options:**- $73,500- $66,000- $7,500- $22,500When determining the maximum contribution to an individual 401(k) for a self-employed individual, the contribution is typically determined based on net earnings from self-employment. In this scenario, this would be the revenue minus expenses.**Steps to Calculate:**1. **Net Earnings:** Calculate the net earnings by subtracting expenses from revenues.2. **Contribution Limits:** Refer to the IRS guidelines for self-employed individual 401(k) contributions, which include elective deferral and employer contribution limits.To get a deeper understanding of how these calculations are done, consider factors like catch-up contributions for individuals over 50, if applicable.

401 (K) Plan: It implies to a plan that is sponsored or funded by the employer with respect to the retirement so as to allow the most eligible employees to make their contributions. These contributions are subtracted by the employer from the salary or gross wages of the employee. As per the Internal Revenue Service (IRS) guidelines, the maximum amount that can be contributed to 401(K) plan by the individual who is below the age of 50 years, has been increased from $20,500 (2022) to $22,500 (2023). This is the basic contribution to be made from the employee side for the year 2023. The $22,500 includes all the after-tax contributions and salary deferrals of elective employees. As Kathy is 48 years which is less than 50 years, therefore the maximum amount that has to be contributed by her is $22,500 for the year 2023, without any extra contributions. Hence, the correct option is $22,500.

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Kathy is 48 years of age and self-employed. During 2023 she reported $522,000 of revenues and $104,400 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k)? Multiple Choice $73,500 $66,000 $7,500 $22,500

Kathy is 48 years of age and self-employed. During 2023 she reported $522,000 of revenues and $104,400 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k)? Multiple Choice $73,500 $66,000 $7,500 $22,500

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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