Orie and Jane, husband and wife, operate a sole proprietorship. They expect their taxable income next year to be $450,000, of which $250,000 is attributed to the sole proprietorship. Orie and Jane are contemplating incorporating their sole proprietorship. (Use the tax rate schedule.) a. Using the married joint tax brackets and the corporate tax rate, find out how much current tax this strategy could save Orle and Jane. (Round your intermediate calculations and final answer to nearest whole dollar amount.) Answer is complete but not entirely correct. Current tax saved 5900,000 b. How much of the income should be converted into corporate income to maximize tax savings? Answer is complete but not entirely correct. Income left 5911,400 2020 Tax Rate Schedules Individuals Schedule X-Single If taxable income is over: But not over: $ 0 $ 9,875 $ 9.875 $ 40,125 $ 40,125 $ 85.525 $ 85,525 $163,300 $163,300 $207,350 $207,350 $518,400 $518,400 The tax is: 10% of taxable income $987 50 plus 12% of the excess over $9.875 $4,617 50 plus 22% of the excess over $40,125 $14,605 50 plus 24% of the excess over $85 525 $33,271,50 plus 32% of the excess over $163,300 $47,367 50 plus 35% of the excess over $207,350 $156,235 plus 37% of the excess over $518,400 Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) If taxable income is over: But not over: The tax is: $ 0 $ 19,750 10% of taxable income $ 19,750 $ 80,250 $1,975 plus 12% of the excess over $19.750 $ 80.250 $171.050 $9,235 plus 22% of the excess over $80,250 $171,050 $326,600 $29,211 plus 24% of the excess over $171,050 $326,600 $414,700 $66 543 plus 32% of the excess over $326,600 $414,700 $622,050 $94,735 plus 35% of the excess over $414,700 $622,050 $167,307 50 plus 37% of the excess over $622,050 Schedule Z-Head of Household If taxable income is over: But not over: The tax is: $ 0 $ 14,100 10% of taxable income $ 14,100 $ 53,700 $1.410 plus 12% of the excess over $14,100 $ 53,700 $ 85,500 $6,162 plus 22% of the excess over $53,700 $ 85,500 $163,300 $13.158 plus 24% of the excess over $85,500 $163,300 $207 350 $31,830 plus 32% of the excess over $163,300 $207,350 $518.400 $45,926 plus 35% of the excess over $207 350 $518.400 $154,793 50 plus 37% of the excess over $518.400 Schedule Y-2-Married Filing Separately Ir taxable income is over: But not over: The tax is: $ 0 $ 9,875 10% of taxable income $ 9.875 $ 40,125 $987 50 plus 12% of the excess over $9.875 $ 40.125 $ 85,525 $4,617 50 plus 22% of the excess over $40,125 $ 85,525 $163,300 $14.605 50 plus 24% of the excess over $85.525 $163,300 $207,350 533 271 50 plus 32% of the excess over $163 300 $207,350 $311.025 $47367.50 plus 35% of the excess over $207,350 $311,025 $83.653.75 plus 37% of the excess over $311.025 2020 Tax Rate Schedules Individuals Schedule X-Single If taxable income is over: But not over: The tax is: $ 0 $ 9.875 10% of taxable income $ 9.875 $ 40,125 $987.50 plus 12% of the excess over $9,875 $ 40,125 $ 85,525 $4,617 50 plus 22% of the excess over $40,125 $ 85,525 $163,300 $14,605 50 plus 24% of the excess over $85,525 $163,300 $207,350 $33.271.50 plus 32% of the excess over $163,300 $207,350 $518,400 $47,367 50 plus 35% of the excess over $207,350 $518,400 $156,235 plus 37% of the excess over $518,400 Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) If taxable income is over: But not over: The tax is: $ 0 $ 19,750 10% of taxable income $ 19,750 $ 80,250 $1975 plus 12% of the excess over $19.750 $ 80,250 $171.050 $9.235 plus 22% of the excess over $80,250 $171,050 $326,600 $29.211 plus 24% of the excess over $171,050 $326,600 $414,700 $66,543 plus 32% of the excess over $326,600 $414,700 $622,050 $94.735 plus 35% of the excess over $414,700 $622,050 $167.307 50 plus 37% of the excess over $622,050 Schedule Z-Head of Household Ir taxable income is over: But not over: $ 0 $ 14,100 $ 14,100 $ 53,700 $ 53,700 $ 85,500 $ 85,500 $163,300 $163,300 $207,350 $207 350 $518,400 $518.400 The tax is: 10% of taxable income $1.410 plus 12% of the excess over $14,100 $6,162 plus 22% of the excess over $53.700 $13,158 plus 24% of the excess over $85.500 $31,830 plus 32% of the excess over $163,300 $45.926 plus 35% of the excess over $207 350 $154,793.50 plus 37% of the excess over $518,400 Schedule Y-2-Married Filing Separately Ir taxable income is over: But not over: The tax is: $ 0 $ 9.875 10% of taxable income $ 9.875 $ 40,125 $987 50 plus 12% of the excess over $9.875 $ 40,125 $ 85,525 $4.617 50 plus 22% of the excess over $40,125 $ 85.525 $163,300 $14.605 50 plus 24% of the excess over $85 525 $163,300 $207,350 $33.27150 plus 32% of the excess over $163,300 $207,350 $311.025 S47 367 50 plus 35% of the excess over $207 350 $311.025 $83.653.75 plus 37% of the excess over $311.025 Orie and Jane, husband and wife, operate a sole proprietorship. They expect their taxable income next year to be $450,000, of which $250,000 is attributed to the sole proprietorship. Orie and Jane are contemplating incorporating their sole proprietorship. (Use the tax rate schedule) a. Using the married-joint tax brackets and the corporate tax rate, find out how much current tax this strategy could save Orie and Jane. (Round your intermediate calculations and final answe to nearest whole dollar amount.) Current tax saved b. How much of the income should be converted into corporate income to maximize tax savings? Income left 2020 Tax Rate Schedules Individuals Schedule X-Single If taxable income is over: But not over: The tax is: $ 0 $ 9.875 10% of taxable income $ 9.875 $ 40,125 $987 50 plus 12% of the excess over $9.875 $ 40,125 $ 85,525 $4.617 50 plus 22% of the excess over $40,125 $ 85.525 $163,300 $14,605 50 plus 24% of the excess over $85525 $163,300 $207,350 $33,271 50 plus 32% of the excess over $163,300 $207 350 $518,400 $47,367 50 plus 35% of the excess over $207,350 $518,400 $156,235 plus 37% of the excess over $518,400 Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) If taxable income is over: But not over: The tax is: $ 0 $ 19.750 10% of taxable income $ 19,750 $ 80.250 $1975 plus 12% of the excess over $19.750 $ 80.250 $171.050 $9,235 plus 22% of the excess over $80.250 $171.050 $326,600 $29.211 plus 24% of the excess over $171,050 $326,600 $414.700 $66 543 plus 32% of the excess over $326,600 $414,700 $622,050 $94.735 plus 35% of the excess over $414.700 $622,050 $167 307 50 plus 37% of the excess over $622,050 Schedule Z-Head of Household Ir taxable income is over: But not over: The tax is: $ 0 $ 14,100 10% of taxable income $ 14,100 $ 53,700 $1.410 plus 12% of the excess over $14,100 $ 53,700 $ 85.500 $6,162 plus 225 of the excess over $53,700 $ 85,500 $163,300 $13.158 plus 24% of the excess over $85 500 $163,300 $207,350 $31.830 plus 32% of the excess over $163 300 $207 350 $518,400 $45.926 plus 35% of the excess over $207,350 5518 400 $154.793 50 plus 37% of the excess over $518.400 ...... Schedule Y-2-Married Filing Separately Ir taxable income is over: But not over The tax is: $ 0 $9.875 10% of taxable income $ 9.875 $ 40,125 $987 50 plus 12% of the excess over $9.875 $ 40,125 S85525 $4,617 50 plus 22 of the excess over $10,125 S85525 S163,300 514 505 50 plus 245 of the excess over $83.525 $163,300 $207350 33 27150 plus 32% of the excess over $163 100 $207350 $311025 S4736750 plus 15% of the excess over $207 350 $311025 583453.75 plus 37 of the crossover $311025