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Alice is single and self-employed in 2018. Her net business profit on her Schedule C for...

Alice is single and self-employed in 2018. Her net business profit on her Schedule C for the year is $190,000.

What is her self-employment tax liability and additional Medicare tax liability for 2018? (Round your intermediate calculations to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Self-employment tax liability

Additional medicare tax liability

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Expert Solution

Ans:

Self-employment tax liability = $21,010

Additional medicare tax liability = $0

Working:

Alice is single and self-employed in 2018.

Self-employment tax is the tax paid to federal government to fund Social Security and Medicare.

Net business profit on her Schedule C for the year is = $190,000

Total income subject to self-employment taxes = $190,000 *92.35% = $175,465

Self-employment(SE) tax consists of 12.4% of Social Security Tax plus 2.9% of Medicare Tax.

12.4% of Social Security Tax is applicable for net income up to $128,400.

2.9% Medicare part of the SE tax on all net earnings

Social Security Tax = $128,400 * 12.4% = $15,921.60

Medicare Tax = $175,465 * 2.9% = $5,088.49

Hence self-employment tax for 2018 = $15,921.60 + $5,088.49= $21,010

For single filers, additional Medicare tax of 0.9 percent kicks in when earned income is over a $200,000.

As such, for Alice:

Additional Medicare tax liability for 2018 = $0

ekkarill92 answered 3 months ago
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