Kathy is 60 years of age and self-employed.During 2019,she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to an individual 401(k)for 2019? Assume she paid $8,478 of self-employment tax for 2019.(Round your final answer to the nearest whole number.)
A)$30,152.
B)$36,152.
C)$56,000.
D)$62,000.

Question

Quizplus · Accepted Answer

Kathy can contribute up to $19,000 as an employee and 20% of her net self-employment income (after deducting half of the self-employment tax) as an employer. Her net income is $60,000 ($100,000 - $40,000), and half of her self-employment tax is $4,239. Thus, her net self-employment income is $55,761 ($60,000 - $4,239). 20% of $55,761 is $11,152. Adding the $19,000 employee contribution, the total is $30,152. However, since Kathy is 60, she can make a $6,000 catch-up contribution, bringing the total to $36,152.

Kathy Is 60 Years of Age and Self-Employed