Question

Exercise 13-26 (Algorithmic) (LO. 6) In 2017, Miranda records net earnings from self-employment of $336,700. She has no other income. In your computations round all amounts to two decimal places. Round your final answers to the nearest dollar. Miranda's self employment tax is _____ and she has a ____ deduction for AGI 25,758 X and she has a Feedback Check My Work The tax on self-employment income is levied to provide Social Security and Medicare benefits (old age, survivors, and disability insurance and hospital insurance) for self-employed individuals

Answer 1

Employment Tax
Gross Income		$336,700.00
Less: $200000 x 7.65%	$15,300.00
$336,700 - $200,000 ( 7.65% + .9%)	$11,687.85	$26,987.85
Taxable Income		$309,712.15
7.65 percent deduction takes into account the employer-half of the FICA tax, which the business would be able to deduct if you were paid as an employee.
Additional 0.9% Medicare tax on the amount that your annual income exceeds $200,000 for single filers
$310,942.45 - $127,200 (Social security deduction maximum limit)	$209,500.00
Self Employment Tax
Medicare Tax = ($200,000 x 2.9%)+($309,712.15 -$200,000) x (2.9%+.9%)	$9,969.06
Social Security Tax = $127,200 x 12.40%	$15,772.80
Total self-employment tax	$25,741.86
Tax-deductible portion	$12,870.93