Kyle, a single taxpayer, worked as a free-lance software engineer for the first
ID: 2536999 • Letter: K
Question
Kyle, a single taxpayer, worked as a free-lance software engineer for the first three months of 2017. During that time, he earned $74,000 of self-employment income. On April 1, 2017, Kyle took a job as a full-time software engineer with one of his former clients, Hoogle Inc. From April through the end of the year, Kyle earned $168,000 in salary.
What amount of FICA taxes (self-employment and employment related) does Kyle owe for the year? (Round your intermediate calculations to the nearest whole dollar amount.)
Explanation / Answer
FICA is your contribution to Social Security and Medicare as a percentage of your salary.
If you're self-employed, then you pay the whole total yourself as Self-Employment tax, and then get a tax deduction on half of it as an "adjustment" on your tax.
If you're an employee, then you pay one half of this total (probably as a withholding on your paycheck); your employer pays the other half for you.
So, On $74,000 which was eartned during self employed, taxes will be:
Social Security: $ 8,474
Medicare: 1,982
Total: $10,456
and on remaining $168000 salary which was earned as an employee is
Social Security: $15,773
Medicare: 4,872
Total: $20,645
Starting in 2013, people with high salaries will pay a new additional Medicare tax of 0.9%. Unlike the rest of Medicare, this new tax depends on your filing status:
$125,000
Therefore 0.9% of your Total Income which is $242000*0.9% = 2178
Therefore Total Tax you owe will be as follows:
Social Security - $ 24647
Medicare: $ 9032 (Including additional medicare taxes)
If your filing status is...then the 0.9% tax applies
to salary above: Single $200,000 Married filing jointly $250,000 Married filing separately
$125,000
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