Question

Volker is an employee of Equus Corporation. He also has his own business working as a ferrier. For 2019, Volker's wages from Equus were $148,000. His self-employment income was $36,500.

If required, round any computations to two decimal places and use in subsequent computations. Round final answers to the nearest dollar.

If an amount is zero, enter "0".

a. Compute the total payroll, self-employment, and additional Medicare taxes for Volker for 2019.

b. Assume the same facts except that Volker's 2019 self-employment activities resulted in a loss of $15,000. Compute the payroll, self-employment, and additional Medicare taxes for Volker for 2019.

c. Compute Volker's NIIT for 2019 using wages of $148,000, self-employment income of $36,500, and NII of $10,000.

Answer 1

a.

• Payroll, which is the combination of Social Security tax rate (6.2%) and the Medicare tax rate (1.45%). the maximum wage base is 132900, which is less than Volker´s.

132900*7.65=10,166.85 this is the payroll tax for 2019.

• For Self-employment, only 92.35% of the net earnings from are subject to self-employment tax.

36500*92.35%=33,707

Self employment taxes= 33707*15.35%=5157.28

• The additional Medicare tax doesn´t apply to Volker because his net earnings are less than 200,000

  OMB No. 1545-0074 SCHEDULE SE (Form 1040 or 1040-SR) Self-Employment Tax 2019 Attachment Sequence No. 17 Department of the Treasury Go to www.irs.gov/ScheduleSE for instructions and the latest information. Internal Revenue Service (99) Attach to Form 1040, 1040-SR, or 1040-NR. Name of person with self-employment income (as shown on Form 1040 1040-SR, or 1040-NR) Social security number of person with self-employment income Before you begin: To determine if you must file Schedule SE, see the instructions. May I Use Short Schedule SE or Must I Use Long Schedule SE? Note: Use this flowchart only if you must file Schedule SE. If unsure, see Who Must File Schedule SE in the instructions. Did you receive wages or tips in 2019? Yes Yes Are you a minister, member of a religious order, or Christian Science practitioner who received IRS approval not to be taxed on earnings from these sources, but you owe self-employment tax on other earnings? Was the total of your wages and tips subject to social security or railroad retirement (tier 1) tax plus your net earnings from self-employment more than $132.900? Yes Are you using one of the optional methods to figure your net earnings (see instructions)? Yes Did you receive tips subject to social security or Medicare tax that you didn't report to your employer? Did you receive church employee income (see instructions) reported on Form W-2 of $108.28 or more? Did you report any wages on Form 8919. Uncollected Social Yes Security and Medicare Tax on Wages? No You may use Short Schedule SE below dule SE below You must use Long Schedule SE on page 2 Section A-Short Schedule SE. Caution: Read above to see if you can use Short Schedule SE. 1a Net farm profit or loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065). box 14, code A . . . . . . . . . . . . . . . . . . . . . . b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net profit or (loss) from Schedule C, line 31; and Schedule K-1 (Form 1065), box 14, code A (other than farming). Ministers and members of religious orders, see instructions for types of income to report on this line. See instructions for other income to report . . . . . . . . . . 36500 Combine lines 1a, 1b, and 2 . . . . . . . . . . . . . . . . . . . . . . . . 36500 Multiply line 3 by 92.35% (0.9235). If less than $400, you don't owe self-employment tax, don't file this schedule unless you have an amount on line 1b. . . 33707.75 Note: If line 4 is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. Self-employment tax. If the amount on line 4 is: • $132,900 or less, multiply line 4 by 15.3% (0.153). Enter the result here and on Schedule 2 (Form 1040 or 1040-SR), line 4, or Form 1040-NR, line 55. • More than $132,900, multiply line 4 by 2.9% (0.029). Then, add $16,479.60 to the result. Enter the total here and on Schedule 2 (Form 1040 or 1040-SR), line 4, or Form 1040-NR, line 55. 5 5157.28 Deduction for one-half of self-employment tax. Multiply line 5 by 50% (0.50). Enter the result here and on Schedule 1 (Form 1040 or 1040-SR), line 14, or Form 1040-NR, line 27 ... For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11358Z Schedule SE (Form 1040 or 1040-SR) 2019 2578.64