Answer to Question #270477 in Accounting for Another you

Question

1. Who are compensation earners?

2. How do you compute taxable income of compensation earners?

3. Who are minimum wage earners? How are they being taxed?

Answer 1

1.Compensation earners are individuals who earns a fixed regular payment made by an employer, often monthly, for professional or office work as opposed to manual work.

2.

1. Determine total income. Individuals should put together all compensation received.
2. Compute unearned income. Unearned income refers to income that is obtained without having to work for compensation, such as dividends, alimony, unemployment compensation, and real estate income.
3. Choose filing status. There are four filing statuses: single, married filing jointly, married filing separately, and head of household.
4. Reduce the income. Form 1040 contains a list of common deductions from gross income.
5. Compute for adjusted gross income. After summing up all the deductions in the previous step, that figure will be deducted from the total, or gross, income to come up with the adjusted gross income.This is the amount of income upon which tax is actually levied.

3.

Minimum wage earners are individuals who receive the lowest remuneration that employers can legally pay them.