Harmony Is Single and Was Self-Employed for the First Half

Question

Examlex · Accepted Answer

The Answer is $2,543.
Answer computed as follows:

\begin{array}{llcc} \text { Description } & \text {Amount } & \text { Reference } \ \text { Limit on Social Security wage } &\ \text { (1) base } &\$132,900\ \text {(2) Employee compensation } &38,000\ \text {(3) Limit on Social Security base for } &\ \text { self-employment tax purposes } &94,900&(1)-(2)\ \text {(4) Self-employment income } &\$18,000 \ \text { Net earnings from self- } &\ \text { (5) employment percentage } &92.35\%&(1)×(4)\ \text { Net earnings from self- } &\ \text { (6) employment } &16,623&(4)×(5)\ \text { Social Security portion of self- } & \text { [Lesser of (3) or $ (6)] \times $}\ \text { (7) employment tax } & 2,061&12.4 \% \ \text { (8) Medicare portion of selfe- } &482& \text { (6) $ \times 2.9 \% $. Note that}\ \text { mployment tax} & &\text { Harmony is not subject to } \&& \text { the additional Medicare tax }\&& \text { because her net selfe- } \ &&\text {mployment earnings do } \&& \text { not exceed $ \$ 200,000 $. }\ \text {Total self-employment tax } &\$2,543&(7)+(8)\\end{array}

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