Question

Steve is self-employed and owns a Ski Shop near a local winter ski resort. His Schedule C shows he made $140,500 for the current year. During the off season he has a job that earns him $20,400 in wages subject to FICA taxes. Calculate Steve's self-employment tax for the current year. You do not have to complete Schedule SE. You must show supporting computations to receive credit.

Answer 1

Any person whose income is more than $400 from self employment he/she has to pay self employment tax @ 15.3%

This 15.3% rate is divided into two portions.

one is 12.4% which is for social security

and balance 2.9% is for medicare

In the given question,

Earnings of steve from self employment = $140,500

Rate of Tax = 15.3%

Tax Amount for current year = 140500 * 15.3% = $21496.50

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