John has $55,000 of self-employment earnings from a sole proprietorship.John is also employed part-time by a major corporation and is paid $25,000.John's self-employment tax for 2019 is
A)$3,886.
B)$4,208.
C)$7,771.
D)$8,415.

Question

Quizplus · Accepted Answer

John's self-employment tax is calculated using Schedule SE. He must pay both the employer and employee portion of Social Security and Medicare taxes (12.4% and 2.9%, respectively) on his self-employment earnings. 
For 2019, Social Security taxes apply to the first $132,900 of combined wages and self-employment income, while Medicare taxes apply to all earnings. 
Thus, John's self-employment tax is calculated as follows:
12.4% x ($55,000 - $25,000) = $3,080 (Social Security portion)
2.9% x $55,000 = $1,595 (Medicare portion)
Total self-employment tax = $3,080 + $1,595 = $4,675
Therefore, the correct answer is C) $7,771.

John Has $55,000 of Self-Employment Earnings from a Sole Proprietorship