Question

Kyle, a single taxpayer, worked as a free-lance software engineer for the first three months of 2019. During that time, he earned $44,000 of self-employment income. On April 1, 2019, Kyle took a job as a full-time software engineer with one of his former clients, Hoogle Inc. From April through the end of the year, Kyle earned $178,000 in salary. What amount of FICA taxes (self-employment and employment related) does Kyle owe for the year? (Round your intermediate calculations to the nearest whole dollar amount.)

Answer 1

Answer:

Calculation of FICA taxes owed for year :

Particulars	Amount	Amount
Social security tax paid as an employee	= $ 1,28,400*6.2%[ lesser of $1,78,000 wages or $ 1,28,400 max base ] = $ 1,28,400*6.2/100 = $ 7,960.8	$7,960.8
Social security wage base less: emp compensation subject to social security tax	= $ 1,28,400 - $ 1,28,400 = $ 0	$ 0
Net earnings from self employment	= $ 44,000 * 92.35% = $ 44,000 *92.35/100 = $ 40,634	$ 40,634
Social security portion of self employment tax	= $0 [lesser of $0*12.4% or $ 40,634*12.4% ]	$ 0
Employer portion of medicare tax for self employment	= $ 40,634*1.45% = $ 40,634 *1.45/100 = $ 589.193	$ 589.193
Sum of taxpayer's compensation and net earnings	= $ 1,78,000 + $ 40,634 = $ 2,18,634	$ 2,18,634
Employee portion medicare tax	= $ 2,00,000 *1.45% [ lesser of $ 2,18,634*1.45% or $ 2,00,000*1.45% ] + ($ 2,18,634 - $ 2,00,000)*2.35% =$ 2,900 + $ 437.899 = $ 3,337.899	$ 3,337.899
Total FICA taxes owed for year	=$ 7,960.8 + $0 + $ 589.19 + $ 3,337.899 = $ 11,887.892	$11,887.9(approx)
Total FICA taxes owed for year	=Social security tax paid as an employee + Social security portion of self employment tax + Employer portion of medicare tax for self employment + Employee portion medicare tax	$ 11,887.9