Lexa Worked as an Employee During the First Half of the Year

question 38

Short Answer

Lexa worked as an employee during the first half of the year earning $65,000 of salary. Lexa's employer withheld $4,030 of Social Security tax and $943 of Medicare tax. In the second half of the year, she was self-employed and she reported $180,000 of self-employment income on her ScheduleC. What amount of self-employment taxes is Lexa required to pay?
$11,549.
$\begin{array}{c}\begin{array}{|l|}\hlineDescription\\\hline\text{(1) Social Security wage base limit less}\\ \text{employec compensation subject to}\\ \text{Social Security tax}\\\hline\text{(2) Net eamings from self-employment}\\\hline\text{(3) Social Security portion of}\\ \text{selfemployment tax}\\\hline\text{(4) Employer portion of Medicare tax on}\\ \text{the self-employment income}\\\hline\text{(5) Sum of taxpayer's compensation and net}\\ \text{earnings from self-employment}\\\hline\text{(6) Lesser of [Step (5) amount or \$ 200,000]}\\ \text{x 1.45 \%}\\\hline \text{(7) Greater of [(a) zero or (b) the amount}\\ \text{from Step (5) minus \$ 200,000] x 2.35 \%}\\\hline \text{(8) Steps \( (6)+(7) \) - Medieare taxes}\\ \text{withheld by Lexa's employer. This is}\\ \text{the employee pertion of Medicare tax}\\ \text{on the self-employment income.}\\\hline\text{(9) Steps (3)+(4)+(8)}\\ \hline\end{array}\begin{array}{r}\hlineAmount\\\hline \$ 52,000 \\\\\\\hline 166,230 \\\hline 6,448 \\\\\hline 2,410 \\\\\hline 231,230 \\\\\hline 2,900 \\\\\hline 734 \\\\\hline 2,691 \\\\\\\\\hline11,549\\\hline\end{array}\begin{array}{|l|}\hlineExplanation\\\hline\$ 117,000-\$ 65,000 , \text{limited to} \$ 0\\\\\\ \hline\$ 180,000 x 92.35 \% \\\hline \text{Lesser of [ Step (1) or (2)]} x 12.4 \% \\\\\hline S tep (2) x 1.45 \% \\\\\hline\$ 65,000+ Step (2) \\\\\hline 200,000 x1.45 \% \\\\\hline31,230 x 2.35 \% \\\\\hline 2,900+734-943 \\\\\\\\\hline\\\hline\end{array}\end{array}$