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

question 84

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.
$\begin{array}{c}\begin{array}{|l|} \hline \text {Description}\\ \hline \text {(1) Social Security wage base limit less}\\ \text { employee compensation subject to }\\ \text {Social Security tax}\\ \hline \text {(2) Net carnings from self-employment}\\ \hline \text {(3) Social Security portion of self}\\ \text {employment tax}\\ \hline \text {(4) Employer pertion of Medicare tax on }\\ \text {the self-employment income}\\ \hline \text {(5) Sum of taxpayer's compensation and net }\\ \text {earnings from self-employment}\\ \hline \text {(6) Lesser of [Step (5) amount or \$ 200,000] }\\ × 1.45 \% \\ \hline \text {(7) Greater of [(a) zero or (b) the amount}\\\text { from Step(5) minus \$ 200,000] × 2.35 \% }\\\hline \text {(8) Steps (6) + (7) - Medicare taxes}\\ \text { withheld by Lexa's employer. This is }\\ \text {the employee portion of Medicare tax}\\ \text { on the self-employment income.}\\\hline \text {(9) Steps (3) +(4)+(8) }\\\hline\end{array}\begin{array}{l|}\hline\text { Amount }\\\hline\$52,000\\\\\\\hline166,230\\\hline6,448\\\\\hline2,410\\\\\hline231,230\\\\\hline2,900\\\\\hline734\\\\\hline2,691\\\\\\\\\hline11,549\\\hline\end{array}\begin{array}{l|} \hline \text {Explamation}\\ \hline\text {\$ 117,000-\$ 65,000 , limited to \$ 0}\\\\\\ \hline \$ 180,000×92.35 \% \\\hline\text { Lesser of [ Step(1) or (2)] × 12.4 \% } \\\\\hline \text {Step (2)× 1.45 \%} \\\\\hline\text { \$ 65,000+ Step (2) }\\\\\hline 200,000×1.45 \% \\\\\hline 31,230× 2.35 \% \\\\\hline 2,900+734-943 \\\\\\\\\hline\\\hline\end{array}\end{array}$

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Definitions:

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