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kyle, a single taxpayer, worked as a freelance software engineer for the first three months of 2023. during that time, he earned $70,000 of self-employment income. on april 1, 2023, kyle took a job as a full-time software engineer with one of his former clients, hoogle incorporated from april through the end of the year, kyle earned $190,000 in salary. what amount of fica taxes (self-employment and employment related) does kyle owe for the year? note: round your intermediate calculations and final answer to the nearest whole dollar amount.

User Metdos
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Final answer:

Kyle owes $10,710 in self-employment tax for his freelance work and $5,421 in FICA taxes for his salaried position, totaling $16,131 in FICA taxes for the year.

Step-by-step explanation:

Kyle, a single taxpayer, has two sources of income for the year: self-employment income as a freelance software engineer, and salary as a full-time employee at Hoogle Incorporated.

To calculate the FICA taxes owed, we must consider both the self-employment tax and the employment-related tax contributions.

As a self-employed individual, Kyle has to pay both the employer and employee portions of Social Security and Medicare taxes. The self-employment tax rate is 15.3%, composed of 12.4% for Social Security up to an income cap (which is often annually adjusted; here we're using the rate applying to the first $113,000 of income) and 2.9% for Medicare with no cap.

Since his self-employment income is $70,000, he would owe $70,000 × 0.153 = $10,710 before any deductions.

For his salaried position earning $190,000, Kyle will have 6.2% deducted for Social Security tax on the first $113,000 and 1.45% for Medicare on the entire amount.

However, since he will have already paid the equivalent of the Social Security tax on his self-employment income, he will only owe the Social Security tax on the remaining difference up to the cap ($113,000 - $70,000 = $43,000), and the full Medicare tax on the entire $190,000.

The calculations are as follows:

Social Security Tax = $43,000 × 0.062

= $2,666 and

Medicare Tax = $190,000 × 0.0145

= $2,755.

Thus, the total FICA tax from his salaried income is $2,666 + $2,755 = $5,421.

Summing the self-employment tax and the taxes from his salaried position, Kyle's total FICA tax liability for the year is $10,710 + $5,421 = $16,131.

User Ashwanth Madhav
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