For Taxpayers Who Receive Both Salary as an Employee and Self-Employment

question 33

Multiple Choice

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year,which of the following statements regarding FICA and self-employment taxes is most accurate?

• A)The Social Security limit applies to the salary but not to the self- employment income.
• B)The Social Security limit applies to the self-employment income but not to the salary.
• C)Salary is first applied against the Social Security limit and then self-employment income is applied against the Social Security limit.
• D)Self-employment income is first applied against the Social Security limit and then salary is applied against the Social Security limit.Salary is applied against the limit first.This is taxpayer favorable because the self-employment income is taxed at a higher rate and not as much of the income will be subject to the Social Security tax than would have been if self-employment income was applied first.

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Source 1 - Destination 3

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