Question

$10,000 of profit from a sole proprietorship in 2020. If he also has $140,000 of salary income, how much self-employment tax will he owe

Answer 1

268 dollars

Step-by-step explanation:

Profit made by this sole proprietor = 10000

Salary income = 140000

The question needs us to calculate the self employment tax that he owes

This tax is about 2.9% of 92.35% of his income. His salary is already more than social security maximum of 128,700.

The, self-employment tax would be = 10,000 x 92.35% x 2.9%

= 267.815

When approximated

= $268