Adam Fleeman, a skilled carpenter, started a home improvement business with Tom Collins, a master plumber. Adam and Tom are concerned about the payroll taxes they will have to pay. Assume they form an S corporation and each earns a salary of $80,000 from the corporation; in addition, they expect their share of business profits to be $60,000 each. How much Social Security tax and Medicare tax (or self-employment tax) will Adam, Tom, and their corporation have to pay on their salary and profits?

1. If Adam and Tom set the company up as a partnership how much will each have to pay in Social Security and Medicare taxes individually? Tip: They will each be allocated $140,000 in total income for the year.