Question

alice is single and self-employed in 2022. her net business profit on her schedule c for the year is $160,000. what are her self-employment tax liability and additional medicare tax liability for 2022?

Answer 1

In 2022, Alice's self-employment tax liability would be $9,920 for Social Security and $4,640 for Medicare. She is not subject to additional Medicare tax as a self-employed individual.

Step-by-step explanation:

In 2022, Alice's self-employment tax liability and additional Medicare tax liability can be calculated based on her net business profit of $160,000.

For self-employment tax liability, Alice will need to pay both the employer and employee portions of the tax. The self-employment tax rate for Social Security is 12.4% (6.2% for employee and 6.2% for employer) on net business income up to the annual wage base limit, which is $147,000 in 2022. For Medicare, the rate is 2.9% (1.45% for employee and 1.45% for employer) on all net business income. Since Alice's net business profit is below the annual wage base limit, her self-employment tax liability would be:

Social Security Tax: $160,000 * 6.2% = $9,920

Medicare Tax: $160,000 * 2.9% = $4,640

Regarding additional Medicare tax liability, this tax only applies to employees and is not applicable to self-employed individuals like Alice.