Question

Required information [The following information applies to the questions displayed below.] Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $85,000 of business income from WCC for the year. Jacob's marginal income tax rate is 37 percent. The business allocation is subject to 2.9 percent of self- employment tax and 0.9 percent additional Medicare tax (Round your intermediate calculations to the nearest whole dollar amount.) a. What is the amount of tax Jacob will owe on the income allocation if the income is not qualified business income? Answer is complete and correct. Tax owed if income is not OBI $ 34,012 b. What is the amount of tax Jacob will owe on the income allocation if the income is qualified business income (QBI) and Jacob qualifies for the full QBI deduction? Answer is complete but not entirely correct. Tax owed if income is OBI 27,721 B 1 2 3 4 5 6 7 8 A $ 85,000.00 $ $ (1,138.21) $83,861.79 $ 31,028.86 $ 2,276.43 $ 706.48 $ 34,011.77 C $ 85,000.00 $ 17,000.00 $ 1,138.21 $ 66,861.79 $ 24,738.86 $ 2,276.43 $ 706.48 $ 27,721.77 What am I getting wrong here?

Answer 1

There is rounding off error.

Ans :27722

Business Income	85000
Less: QBI Deduction	17000	[85000*20%]
Deduction for SE tax	1138.21375	[85000*92.35%*2.9%*50%]
Taxable income	66861.78625
Income tax paid	24738.86091	[66861.78625*37%]
Self employment tax	2276.4275	[85000*92.35%*2.9%]
Additional medicare tax	706.4775	[85000*92.35%*0.9%]
Owner level tax	27722