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Vernon Inc.needs an additional worker on a multi-year project.Vernon could either hire an employee for a $72,000 annual salary or engage an independent contractor for a $75,000 annual fee.If Vernon's marginal income tax rate is 21%,which option minimizes the after-tax cost of obtaining the worker?
Deductibility
Deductibility refers to the eligibility of an expense to be subtracted from gross income to reduce taxable income, based on IRS guidelines.
Schedule C
A form used by sole proprietors to report income and expenses from a business or profession to the IRS.
Schedule E
A form used with the Form 1040 for reporting income from rental property, royalties, partnerships, S corporations, estates, trusts, and residual interests.
Tax Purposes
Criteria or activities specifically considered or accounted for in the calculation or management of taxes.
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