Question

During the tax year, Taxpayer earned $97,000 in salary from his employer. Taxpayer also conducted a...

During the tax year, Taxpayer earned $97,000 in salary from his employer. Taxpayer also conducted a self-employment activity, the net profit of which was $45,000. Determine Taxpayers Self-Employment tax liability for the year?

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Answer #1

Answer:

$6,358.30

Explanation:

Since, no year is specifically given 2019 is taken for calculation:

=45,000*.9235=41,557.50

=41,557.50 × .153 = 6,358.30

Generally, 92.35% of your net earnings from self-employment is subject to self-employment tax.therefore we multiply 45,000*.9235

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).Therefore we multiply self employment taxable income with tax rate which is 41,557.50 × .153

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