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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 $154,000. 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.)

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Answer:

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 = $154,000

Total income subject to self-employment taxes = $154,000 *92.35% = $142,219

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 = $142,219 * 2.9% = $4,124.35

Hence self-employment tax for 2018 = $15,921.60 + $4,124.35 = $20,045.95

Alice can deduct the employer-equivalent portion of her self-employment tax in figuring her adjusted gross income:

As such Alice's self-employment tax liability for 2018 = $20,045.95 - $20,045.95/2 = $10,023

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 2 years ago
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