During 2012, Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $26,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $6,000.Eleanor also has a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:

Question

Quizplus · Accepted Answer

Eleanor must pay self-employment tax on her net earnings from self-employment, which is the gross income from her consulting service ($26,000) minus the deductible expenses ($6,000), resulting in $20,000.

During 2012, Eleanor Earns $120,000 in Wages as an Employee