During 2010,Eleanor earns $146,000 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 a self-employment tax on the income earned from her outside consulting service. She earned $26,000 in gross income from the consulting service and deducted $6,000 in expenses, leaving a net income of $20,000. Self-employment tax is calculated as 15.3% of net income, so Eleanor must pay 15.3% of $20,000, which is $3,060. Therefore, option B is the correct answer as it is the only option that is close to the amount Eleanor is required to pay.

During 2010,Eleanor Earns $146,000 in Wages as an Employee of an Accounting