Problem 3-29 Tax Rates (LO4) You have set up your tax preparation firm as an incorporated business. You took $70,000 from the firm as your salary. The firm's taxable income for the year (net of your salary) was $30,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3.5 and Table 3.7. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) a. How much tax must be paid to the federal government, including both your personal taxes and the firm's taxes? Total taxes b. By how much will you reduce the total tax bill if you cut your salary to $50,000, thereby leaving the firm with taxable income of $50,000? Tax reduction c. What allocation will minimize the total tax bill? Hint: Think about marginal tax rates and the ability to shift income from a higher marginal bracket to a lower one. Total tax bill TABLE 3.5 Corporate tax rates, 2016 Tax Rate (%) 15 Taxable Income ($) 0-50,000 50,00 175,000 75,001-100,000 100,001-18,333,333 Over 18,333,333 25 34 Varles between 39 and 34 35 TABLE 3.7 Personal tax rates, 2016 Single Taxpayers 0-9,275 9,276-37,650 37,651-91,150 91,151190,150 190,151-413,350 413,351-415,050 415,051 and above Taxable Income ($) Married Taxpayers Filing Joint Returns 0-18,550 18,55175,300 75,301151,900 151,901231,450 231,451-413,350 413,351-466,950 466,951 and above Tax Rate (%) 10.0 15.0 25.0 28.0 33.0 35.0 39.6 14 Losses can be carried back for a maximum of 3 years and forward for up to 15 years