In 2020, Amanda earned $70,000 self-employment income. She was allowed a $4,945 above-the line deduction for her SE tax. Compute Amanda's maximum contribution to her profit-sharing Keogh plan.

Question

Quizplus · Accepted Answer

To compute Amanda's maximum contribution to her profit-sharing Keogh plan, we need to follow these steps:

1. Calculate Amanda's net self-employment earnings:

$70,000 (self-employment income) - $4,945 (above-the-line deduction for SE tax) = $65,055 (net self-employment earnings)

2. Calculate Amanda's maximum contribution to her profit-sharing Keogh plan:

$65,055 x 0.20 (maximum contribution percentage for profit-sharing Keogh plan) = $13,011

Therefore, Amanda's maximum contribution to her profit-sharing Keogh plan is $13,011.

Option A is the correct answer.

In 2020, Amanda Earned $70,000 Self-Employment Income