Question

Sarah (single) is a 50 percent owner in Beehive LLC (taxed as a partnership). Sarah does not do any work for Beehive. Beehive LLC. reported $600,000 of taxable business income for the year (2020). Before considering her 50 percent business income allocation from Beehive and the self-employment tax deduction (if any), Sarah’s adjusted gross income is $150,000 (all employee salary). Answer the following questions for Sarah.

c. What is Sarah’s self-employment tax liability?

d. What is Sarah’s additional Medicare tax liability?

Answer 1

Answer:

c. $38,250

d. $2,250

Explanation:

S. no	Particulars	Amount
	Salary	$       1,50,000
	Add: Allocated Income	$       3,00,000
	Modified adjusted gross income	$       4,50,000
c.	Modified adjusted gross income	$       4,50,000
	Less: Threshold amount	$       2,00,000
	Net income	$       2,50,000
	self-employment tax:
	Social security tax	$           31,000
	Medicare	$             7,250
		$           38,250
d.	Additional medicare tax liability
	Modified adjusted gross income	$       4,50,000
	Less: Threshold amount	$       2,00,000
	Net income	$       2,50,000
	Additional medicare tax liability	$             2,250

Workings: