Question

Kyle, a single taxpayer, worked as a freelance software engineer for the first three months of 2020. During that time, he earned $54,000 of self-employment income. On April 1, 2020, 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 $200,000 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

Computation of Income of Kyle for 2020
	Note	Amount
Income from Salary		$200,000
Income from Business		$54,000
Total Income		$254,000
Total Deductions	1	$12,400
Total Exemptions		$0
Taxable Income		$241,600
Regular Taxes	2	$56,463
Alternative Minimum Tax		$0
Net Investment Income Tax		$0
All Tax Credits		($333)
Social Security(Business Income)	3	$6,696
Medicare Tax (Business Income)	4	$1,566
Total Tax with Credits		$64,392
Marginal Tax Rate		35%
Tax Pre-payments		$0
Tax Amount Owe		$64,392

Note 1: In 2020, Standard Deduction is $12,400 for single taxpayers

Tax Calculation Working		Amount
Tax on $ 9875 @ 10%		$988
Tax on $ 9875-40125 @ 12%		$3,630
Tax on $ 40125 -85525 @ 22%		$9,988
Tax on $ 85525-163300 @ 24%		$18,666
Tax on $ 163300 -207350 @ 32%		$14,096
Tax on balance Amount @35%		$11,988
(241600- 207350)*35%
Total Tax		$59,355
Marginal Relief		($2,892)
Total TaxPayable		$56,463

Note 3 : If you’re self-employed, you pay the combined employee and employer amount, which is a 12.4% Social Security tax on up to $137,700 of your net earnings. (On earnings Maximum upto $ 137,700). SS Tax = $54,000*12.4%

Note 4: If you’re self-employed, Medicare tax is 2.9% on your entire net earnings. If your earned income is more than $200,000, you must pay 0.9 % more in Medicare taxes on additional amount over and above threshhold limit. Medicare Taxes= $54,000*2.9%