Question

Assume that the maximum wage base for FICA is $100,000 and that the tax rate is 6.20% of Social Security and 1.45% for Medicare. Employers and employees share the tax equally, meaning that both pay 7.65%. Which of the following is true for Joe, a self-employed person?

A. Joe must pay 15.3% (7.65% in his role as employer and 7.65% in his role as employee) under the Self-Employment Contributions Act of 1954.
B. In calculating his "net earnings from self-employment" that will be subject to the tax, Joe may subtract 7.65% of his gross earnings to account for the fact that employees do not get taxed on their employers’ contribution to the second half of FICA, so self-employed persons should not be taxed on that half of their contribution either.
C. A and B.
D. d. None of the above.

Answer 1

A and B is the answer QUESTION:Assume that the maximum wage base for FICA is $100,000 and that the tax rate is 6.20% of Social Security and 1.45% for Medicare. Employers and employees share the tax equally,meaning that both pay 7.65%. Which of the following is true for Joe, a self-employed person?A. Joe must pay 15.3% (7.65% in his role as employer and 7.65% in his role as employee) under the Self-Employment Contributions Act of 1954.B. In calculating his "net earnings from self-employment" that will be subject to the tax, Joe may subtract 7.65% of his gross earnings to account for the fact that employees do not get taxed on their employers' contribution to the second half of FICA, so self-employed persons should not be taxed on that half of their contribution either