Question

Alice is single and self-employed in 2019. Her net business profit on her Schedule C for the year is $150,000. What is her self-employment tax liability and additional Medicare tax liability for 2019? (Round your final answer to the nearest whole dollar amount. Leave no answer blank.)

Answer 1

Answer:

She is not subjected to additional medicare tax.

Explanation:

A taxpayer's tax base for computing a self-employed taxpayer's self-employment tax (i.e., net earnings from self employment) is the taxpayer's net business profit from schedule C multiplied by 92.35%

so, Alice's net earnings from self-employment is her net profit from schedule c of $150,000 × 92.35% = $138,525.

Alice will owe ($138,525 × 2.9%) $4018 for the Medicare components of FICA taxes and $15, 922 ($128,400 maximum amount × 12.4%) $15,0922.

Alice owes total self-employment tax of ($15, 922 + $4018) = $19,940. she is not subject to the additional Medicare tax because her net earnings from self-employment do not exceed $200,000.