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 - $135,0000$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).

Business

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