Question

In: Accounting

Robert earned $20,000 of profit from a sole proprietorship in 2018. If he also has $118400...

Robert earned $20,000 of profit from a sole proprietorship in 2018. If he also has $118400 of salary income, how much self-employment tax will he owe?

A. 1820

B. 1776

C. 536

D. $580

Solutions

Expert Solution

Correct option is "A"- 1820

In case if a person is self employed and is in employment too ,the employment income should be first considered for social security tax limit .

FICA rates are classified in to two categories:

2018
social security tax 6.2% up to $ 128400
Medicare tax 1.45%

In case of self employment ,person has to pay both employer and employee portion .Self employment income subject to social security tax = maximum limit -employment income

                 = 128400 -118400

                  = 10000

Self employment Taxes
social security taxes 10000*6.2%= 620 employer portion +620 employee portion= 1240
Medicare taxes 20000*1.45%= 290 employer portion +290 employee portion= 580
Total self employment taxes due 1820

ekkarill92 answered 7 months ago
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