Sonya started a self-employed consulting business in the last part of the year and earned $40,000. She had been employed as manager in a consulting firm prior to starting her own business and had earned $135,000.a. What is Sonya's self employment tax for 2018?b.What is Sonya's deduction for AGI for the SE tax?
What will be an ideal response?
| a. Net earnings from self-employment | $40,000 × .9235 | $36,940 |
| Soc. Sec.: .124 × lesser of- | ? | ? |
| (1) net earnings from self-employment, or | $36,940 | ? |
| (2) maximum base - taxed wages | ? | ? |
| $128,400 - $135,000 | 0 | $0 |
| Medicare tax: | ? | ? |
| .029 × $36,940 | ? | 1,071 |
| Self-employment tax | ? | $1,071 |
Her employee wages from her prior job exceeded the maximum wage base for Social Security so no additional Social Security tax is included in the self-employment tax.
| b. | The deduction for AGI will be $536 (.5 × $1,071). |
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