Question

SECA: Self-Employed Contributions Act

In 1951, the Self-Employment Contributions Act (SECA) extended coverage under the social security system to the self-employed.

SECA uses an individual’s self-employment income as the basis for levying taxes and for determining the amount of income to credit toward OASDI insurance benefits or HI coverage. Self-employment income generally consists of the net earnings derived by individuals from a business or profession carried on as a sole proprietorship or as a partnership. Self-employed persons determine their net earnings by finding the sum of the following:

1. Gross income
2. Distributive share

? Tackle It

Using the information provided here and in your text, complete the following:

1. Gross income is defined as income derived from any business or profession carried on  by the individual, less allowable deductions.
2. Whether or not distributed , the distributive share is the ordinary net income or loss from any business or profession carried on by a partnership .
3. The self-employed OASDI tax rate for 2019 is  in decimal format or %.
4. The self-employed HI tax rate for 2019 is  in decimal format or %.
5. Self-employment income is  subject to a supplemental HI tax of % for earned income in excess of $ for individuals whose filing status is Single.
6. True or False: If the individual is also an employee of another company, the wages received will not reduce the amount of self-employment income that is taxed for OASDI. False
7. Earnings of less than $ from self-employment are ignored.

Answer 1

1. The self-employed OASDI tax rate for 2019 is  in decimal format or % = 0.124 or 12.4%.
2. The self-employed HI tax rate for 2019 is  in decimal format or % = 0.029 or 2.9%.
3. Self-employment income is  subject to a supplemental HI tax of 0.9% for earned income in excess of $ 200,000 for individuals whose filing status is Single. (If married and filing separately, it is $125,000).
4. If the individual is also an employee of another company, the wages received will not reduce the amount of self-employment income that is taxed for OASDI. ---- false. (Income lmit for OASDI taxes is $132900 for 2019. Any wages received from employment may reduce self-employment income subject to OASDI Taxes).
5. Earnings of less than $ 400 from self-employment are ignored.

(1&2 - Social security taxes on self-employment income is calculated on the base of 92.35% of net earnings)

1. Gross income is defined as income derived from any business or profession carried on  by the individual, less allowable deductions.
2. Whether or not distributed , the distributive share is the ordinary net income or loss from any business or profession carried on by a partnership .