Chapter 10, Problem 11AP

Jane is a self-employed attorney. This year, her net profit exceeded $350,000, which put her in the 37 percent tax bracket. Early in the year, Jane hired Ben as a paralegal and paid him a $33,000 salary.

1. a. Compute the employer payroll tax on Ben’s salary.
2. b. In addition to the employer payroll tax, Jane paid $400 unemployment tax on Ben’s salary. The salary and tax expense reduced Jane’s net earnings from self-employment, thereby saving $962 in self-employment tax. Compute Jane’s after-tax cost of hiring Ben.