Final answer:
Self-employment tax due for Lynette in 2017, with $30,000 in wages and $20,000 in business income, would be a total of $3,060. This includes both Social Security at 12.4% and Medicare at 2.9% of her self-employment income.
Step-by-step explanation:
To determine the amount of self-employment tax due for 2017, assuming Lynette earned $30,000 in wages and also earned $20,000 from a business that she owned, we will calculate based on the Self-Employment Contributions Act (SECA). Lynette has to pay both the employer and employee portions of Social Security and Medicare taxes on her self-employment income because the business is not incorporated. In 2017, the Social Security tax rate for self-employed individuals was 12.4% up to an income limit, and the Medicare tax rate was 2.9%, with no income limit.
The total self-employment tax is calculated as follows:
- Social Security Tax: 12.4% on the first $127,200 of total earnings (wages plus self-employment income). As Lynette’s combined earnings are $50,000, all her self-employment income is subject to the Social Security tax.
- Medicare Tax: 2.9% on all self-employment income, as there's no cap for Medicare.
For the self-employment income of $20,000, the Social Security tax would be 12.4% of $20,000, which equals $2,480. The Medicare tax would be 2.9% of $20,000, which equals $580. Therefore, the total self-employment tax due would be the sum of these two amounts: $2,480 + $580 = $3,060.