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Exercise 11-9 (Algorithmic) (LO. 6) In 2019, Miranda records net earnings from self-employment of $189,300. She...

Exercise 11-9 (Algorithmic) (LO. 6)

In 2019, Miranda records net earnings from self-employment of $189,300. She reports no other gross income. Determine the amount of Miranda's self-employment tax and her for AGI income tax deduction.

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.

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Answer #1

Net earnings from self-employment = $189,000

Self-employment income subject to self-employment taxes = $189,000 * 92.35% = $174,541.5

Self-employment tax for 2019:

Income up to $132,900 is subject to FICA taxes (12.4%) = $132,900 * 12.4% = $16,479.6

Medicare tax (2.9%) on income of $174,541.5 = $174,541.5 * 2.9% = $5,061.7

Total self-employment taxes for 2019 = $21,541

The taxpayer is allowed a deduction for AGI of one-half of the self-employment tax

= $21,541 * 50% = $10,771

Miranda's self-employment tax is $21,541 and she has a $10,771 deduction for AGI.

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