Question

Kyle, a single taxpayer, worked as a freelance software engineer for the first three months of 2020. During that time, he earned $94,000 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 $188,000 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

Total FICA Taxes = 25,645.4

Computation

For self employment income (a)

= (94,000x15.3%) = 14,382

For salary (b)

= ((137,700 x 6.2%) + (188,000 x 1.45%))

=8,537.4+2,726

= 11,263.4

Total FICA tax for the year (a+b) = 25,645.4

Explanation

FICA tax for the self-employed. The self-employed don't have an employer to collect and pay FICA taxes. Instead, you must pay both the employer and worker amounts (15.3% total), and deduct one-half of the self-employment taxes on your personal tax return.

Federal payroll taxes cover Social Security and Medicare contributions, which constitute the Federal Insurance Contributions Act (FICA) tax. An employee pays 7.65%.4 This rate is divided between a 6.2% deduction for Social Security on a maximum salary of $137,700, while the other 1.45% goes to Medicare.5 There is no salary limit on Medicare