Question

The reduction in self-employment tax for an individual with taxable earnings of $50,319 is approximately -$1,000 resulting from the reduction of the tax rate from 15.3% to 13.3% by the tax relief, unemployment insurance reauthorization, and job creation act of 2010.

a. True
b. False

Answer 1

The statement is false because the self-employment tax rate for an individual earning $50,319 would see a reduction of approximately $1,006.38 with a tax rate decrease from 15.3% to 13.3%, not specifically -$1,000.

Step-by-step explanation:

The statement that the reduction in self-employment tax for an individual with taxable earnings of $50,319 is approximately -$1,000 resulting from the reduction of the tax rate from 15.3% to 13.3% by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is false. The self-employment tax consists of two parts: Social Security tax and Medicare tax.

An individual who is self-employed would normally pay a total of 15.3% on eligible earnings (12.4% for Social Security and 2.9% for Medicare). If we calculate the change from 15.3% to 13.3%, we need to apply the 2% reduction to the earnings of $50,319 to approximate the reduction in self-employment tax.

The calculation would be: $50,319 x 0.02 = $1,006.38.

However, this reduction was temporary, and the self-employment tax rate has reverted to 15.3% after the expiration of this tax relief act.