Question

Steve is self-employed and owns a Ski Shop near a local winter ski resort. His Schedule C shows he made $140,500 for the current year. During the off season he has a job that earns him $20,400 in wages subject to FICA taxes. Calculate Steve's self-employment tax for the current year. You do not have to complete Schedule SE. You must show supporting computations to receive credit.

Answer 1

Social security is 12.4% on self-employment net earnings upto $132,900. Medicare is 2.9%

Below is the computation:

Particulars	Social security	Medicare
Self-employment wages	$ 140,500.00	$ 140,500.00
× 92.35% = (a)	$ 129,751.75	$ 129,751.75
Ceiling applicable (b)	$ 112,500.00	$                  -
Earnings subject to taxes Lesser of (a) and (b)	$ 112,500.00	$ 129,751.75
× tax rate	12.40%	2.90%
Tax amount	$    13,950.00	$      3,762.80
Total tax amount	$    17,712.80
Particulars	Social security
Ceiling amount	$ 132,900.00
Less: wages subject to tax	$    20,400.00
Self-employment taxable ceiling	$ 112,500.00

Total social security taxes payable is $17,712.80

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