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Self-Employed Social Security Taxes (LO. 2) For 2019, Eric is a self-employed financial consultant. During the...

Self-Employed Social Security Taxes (LO. 2)

For 2019, Eric is a self-employed financial consultant. During the current year, Eric's net self-employment income is $160,000. The OASDI rate is 6.2%; the MHI rate is 1.45%.

Hint: OASDI 6.2% tax is on the first $132,900 for the year.

Note: Round all calculations to the nearest cent.

What is Eric's self-employment tax?

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Answer #1

Eric's self-employment tax is calculated as follows:

Since the amount is contributed by both employer and employee and so we should calculate the taxes for bothe employer and employee.So we multiply by 2.

$
OASDI ( $132,900 * 6.2% * 2)         16,480
MHI (Medical Hospital Insurance) ($160,000 * 1.45% * 2)           4,640
Total self-employment tax    $21,120

Eric's self-employment tax is $21,120.

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