Artemis Natural Homes |
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Taxes |
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Years 1 to 5 |
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($) |
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Industry |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
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Net Revenues |
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102,000 |
357,000 |
595,000 |
952,000 |
1,088,000 |
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Income Tax (Rate Federal
& State) |
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0.00 |
0.48 |
0.39 |
0.44 |
0.44 |
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( and Self Employment) |
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Net Earnings Before Taxes |
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(15,614) |
16,657
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31,729
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81,743
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71,657
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Cumulative |
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(15,614) |
1,043
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32,771
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114,514
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186,171
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Taxes |
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0 |
-504 |
-12,342 |
-35,885 |
-31,457 |
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Percent of Revenues |
-1.3% |
0.0% |
-0.1% |
-2.1% |
-3.8% |
-2.9% |
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Limited Liability Company |
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income is treated as personal
income |
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CEO salary |
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15,000 |
51,000 |
76,000 |
84,000 |
88,000 |
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Total
taxable to select marginal tax rate |
0
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52,043 |
107,729 |
165,743 |
159,657 |
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Federal marginal tax rate |
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0% |
28% |
31% |
36% |
36% |
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(from 1998 1040 instructions) |
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State
marginal tax rate (assumed fixed) |
0% |
5% |
5% |
5% |
5% |
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Federal self employment tax |
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social security taxable |
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0
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1,043 |
0
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0
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0
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(company's portion) |
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social security tax @ 12.4% |
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0.00 |
129.30 |
0.00 |
0.00 |
0.00 |
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medicare tax @ 2.9% |
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0.00
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30.24 |
920.13 |
2,370.54 |
2,078.06 |
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total self employment tax |
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0.00 |
159.53
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920.13
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2,370.54
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2,078.06
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convert to percentage of EBT |
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0.00% |
15.30% |
2.90% |
2.90% |
2.90% |
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Assumptions |
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CEO
pays social security on her income first, out of personal funds, satisfying
the social security tax requirement. (Taxable cutoff is $68,400.) |
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CEO
calculates her federal income tax rate, to be paid with her personal funds,
on her salary only. Therefore,
company contribution |
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to
federal income tax bill is calculated at the MARGINAL tax rate, which may be
higher than the CEO's net personal tax rate. |
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1998 Federal tax rates |
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Income >= |
Marginal rate |
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-1,000,000,000.00 |
0 |
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0.01 |
15.0% |
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25,350.01 |
28.0% |
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61,400.01 |
31.0% |
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128,100.01 |
36.0% |
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278,450.01 |
39.6% |
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