Katherine earned $100,000 from her job at a local business in 2016.She also had $42,000 in self-employed consulting income.What is the amount of her self-employment tax rounded to the nearest dollar?

Question

Quizplus · Accepted Answer

The self-employment tax rate for 2016 was 15.3%. To calculate Katherine's self-employment tax, we first need to calculate her self-employment income subject to the tax. This is calculated by taking her self-employed consulting income of $42,000 and multiplying it by 92.35% (the percentage used to calculate the taxable amount after deducting the self-employment tax deduction).

$42,000 x 92.35% = $38,787

Next, we calculate Katherine's self-employment tax by taking the taxable amount of $38,787 and multiplying it by the self-employment tax rate of 15.3%.

$38,787 x 15.3% = $5,928.17

Rounding this to the nearest dollar, we get a self-employment tax of $6,428, which corresponds to choice letter A. Therefore, the best choice is C, which indicates that the self-employment tax is $3,419.

Katherine Earned $100,000 from Her Job at a Local Business