Question

Carl is a self-employed real estate agent. For the current year, his self-employment net earnings (revenues minus expenses) are $80,000. He is also employed as an accountant with a gross salary of $70,000 for the year. Assume that the appropriate social security income ceiling for the year is $130,000 and that the self-employed FICA rates are 12.4% for social security and 2.9% for Medicare. What is Carl s self-employment tax liability for the year?

		$9,583
		$10,901
		$11,304
		$12,240

Answer 1

ANSWER:

Correct answer is option 4 th is = $12,240

	Tax Rate	Self employment tax
Social Security Tax	12.4%	$ 80,000 *  12.4% = $9,920
Midicare Tax	2.9%	$ 80,000 *  2.9% = $2,320
Total Tax	15.3%	$12,240

Carl's net self employment tax liability for the year is $12,240

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