### UNFORMATTED ATTACHMENT PREVIEW

1. Baily owns and operates Ben’s Red Truck Shop (BRT), which is a sole proprietorship. She has selfemployment income of \$150,000. How much self-employment tax does she owe ? \$21,092. \$21,194. \$22,194. \$2 2,950. Answer: \$21,092 Explanation: MEDICARE TAX RATE Employer: 1.45% Employee: 1.45% Therefore, a self-employed worker will be taxed 1.45% + 1.45% = 2.9% The total self-employment tax rate is 12.4%. Therefore, 12.4% + 2.9% = 15.3% Baily (self-employed) having net income of exactly \$150,000 Self-employment tax rate \$150,000* 92.35% =\$138,525 The security wage base \$137,700 \$138,525*15.3%= \$21,194.325 Social security tax = Lower of 137700 or 12.4 % = 137,700* 12.4 % = \$ 17074.8 \$137,700*2.9%= \$4,017.23

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