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625 Oak Street Corbin, KY 40701 Dear Dan and Freida $ You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The 37,000 reduction in Dan's pay will be partially offset by a su 4,000 V estimated increase in the amount Freida will earn. This net SI 33,000 V reduction in salary and wages will also result in a decrease in your Kentucky income tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately 22:36 V. The calculations are presented below: Taxable income Cash Flow Decrease in salary and other earned income (si 148,382 X) ( 33,000 ) Decrease in Social Security and Medicare tax 2,525 Decrease in Kentucky income tax 700X 1,320 Decrease in Federal taxable income 8,470 X) Decrease in Federal income tax 8,470 X After tax decrease in cash flow 22,185 ) If you have any further questions, please call me. Check My Work Instructions Form 1040 Schedule 1 Schedule Qualified Dividends and Capital Gain Tax Worksheet Tax Planning Dan plans to reduce his work schedule and work only hall-time for W] in 2021. He has been writing songs for several years and wants to devote more time to developing a career as a songwriter. Because of the uncertainty in the music business, however, he would like you to make all computations assuming that he will have no income from songwriting in 2021. To make up for the loss of income, Freida plans to increase the amount of time she spends selling real estate. She estimates that she will be able to earn $90,000 in 2021 Assume that all other income and expense items will be approximately the same as they were in 2020 (including the prize winnings) Assume that wille will be enrolled in college as a full-time student for the summer and fall semesters. No changes regarding Gina and Ben The $3,100 commission received on January 10, 2021, is included in the $90,000 income to be earned by Freida in 2021 The 22%2020 marginal tax rate remains the same in 2021 Assume a payroll tax rate for FICA and Medicare of 7.65% and the Kentucky state income rate of 4% Assume Interest income, dividend income, prize income and the standard deduction will be the same for 2021 Complete the following letter regarding whether the Butlers will have more or less disposable income (after federal income tax) in 2021. SWFT, LLP 5191 Natorp Boulevard Mason, OH 45040 October 29, 2020 Dan and Freida Butler 625 Oak Street Corbin, KY 40701 Dear Dan and Freida Check My Work 625 Oak Street Corbin, KY 40701 Dear Dan and Freida $ You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The 37,000 reduction in Dan's pay will be partially offset by a su 4,000 V estimated increase in the amount Freida will earn. This net SI 33,000 V reduction in salary and wages will also result in a decrease in your Kentucky income tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately 22:36 V. The calculations are presented below: Taxable income Cash Flow Decrease in salary and other earned income (si 148,382 X) ( 33,000 ) Decrease in Social Security and Medicare tax 2,525 Decrease in Kentucky income tax 700X 1,320 Decrease in Federal taxable income 8,470 X) Decrease in Federal income tax 8,470 X After tax decrease in cash flow 22,185 ) If you have any further questions, please call me. Check My Work Instructions Form 1040 Schedule 1 Schedule Qualified Dividends and Capital Gain Tax Worksheet Tax Planning Dan plans to reduce his work schedule and work only hall-time for W] in 2021. He has been writing songs for several years and wants to devote more time to developing a career as a songwriter. Because of the uncertainty in the music business, however, he would like you to make all computations assuming that he will have no income from songwriting in 2021. To make up for the loss of income, Freida plans to increase the amount of time she spends selling real estate. She estimates that she will be able to earn $90,000 in 2021 Assume that all other income and expense items will be approximately the same as they were in 2020 (including the prize winnings) Assume that wille will be enrolled in college as a full-time student for the summer and fall semesters. No changes regarding Gina and Ben The $3,100 commission received on January 10, 2021, is included in the $90,000 income to be earned by Freida in 2021 The 22%2020 marginal tax rate remains the same in 2021 Assume a payroll tax rate for FICA and Medicare of 7.65% and the Kentucky state income rate of 4% Assume Interest income, dividend income, prize income and the standard deduction will be the same for 2021 Complete the following letter regarding whether the Butlers will have more or less disposable income (after federal income tax) in 2021. SWFT, LLP 5191 Natorp Boulevard Mason, OH 45040 October 29, 2020 Dan and Freida Butler 625 Oak Street Corbin, KY 40701 Dear Dan and Freida Check My Work