Juanita is the self-employed owner of Juanita's Linens. Her estimated annual earnings are $73,040 and she expects to pay 27% of this amount in income tax. What will be her quarterly estimated tax payment for the third quarter? (For self-employed persons, social security tax is 12.4% of wages up to $128,400, and Medicare tax is 2.9% of all wages.)

Question

Quizplus · Accepted Answer

First, calculate the total tax rate: 27% income tax + 12.4% social security tax + 2.9% Medicare tax = 42.3%. Then, calculate the total annual tax: $73,040 * 42.3% = $30,895.92. Finally, divide by 4 for the quarterly payment: $30,895.92 / 4 = $7,723.98.

Juanita Is the Self-Employed Owner of Juanita's Linens