Question

In 2019, Miranda records net earnings from self-employment of $204,700. She reports no other gross income. Determine the amount of Miranda's self-employment tax and her for AGI income tax deduction.

In your computations round all amounts to two decimal places. Round your final answers to the nearest dollar.

Miranda's self-employment tax is $.............and she has a $............... deduction for AGI.

Answer 1

Calculation of Self-Employment Tax of Miranda

Self-Employment Tax Analysis	Social security	Medicare
Adjusted earnings	$132,900	$204,700
Less: self employment adjustment	$0	$15,702
Taxable employment earnings	$132,900	$188,998
Self employment tax	$16,480	$5,480.94
Total self employment tax		$21,960.94
Tax deduction portion		$10,980.47

Total self-employment tax of $21,961 is comprised of $16,480 Social Security tax and $5,481 Medicare tax. The tax-deductible portion for Form 1040 is $10,980.

Note:If you are self-employed, your Social Security tax rate is 12.4 percent and your Medicare tax is 2.9 percent on those same amounts of earnings but you are able to deduct the employer portion.You will pay an additional 0.9% Medicare tax on the amount that your annual income exceeds $200,000 for single filers.

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