Question

OASDI for self employment

74700.00 wages

60,000.00 self employment

wage base is 132900.

3-8B.LO 3 See Example 3-5 on page 3-13 ME HOW 00 during 20 - by Umberger Company. In addition, during the year, Parker ee Parker was paid a salary of $74,700 during 20-- by Umberger Company. In addition as a public accountant and reported a net business income of $60,000 on his income tax started his own business as a public accountant and reported return for 20- Compute the following: a. The amount of FICA taxes that was withheld from his earnings during 20-- by Umberger Company. b. Parker's self-employment taxes on the income derived from the public accounting business for 20. OASDI HI OASDI HI 3-55

Answer 1

The FICA tax considered of social security Tax i.e OASDI and medicare tax i.e HI

The OASDI contribution is deducted from employees salary @ 6.2% and same amount of contribution is added by employer @6.2% By employer

The HI contribution is 1.45% which is contibuted by both employee and employer

(A) FICA taxes that are withheld from geroge earnings

THE TOTAL PAYABLE SALARY AFTER  DEDUCTION OF GEORGE WAS 74700 , SO WE WILL COMPUTE BEFOR DEDUCTION SALARY OF GEROGE

=74700*100/(100-6.2-1.45)

=$ 80888

OASDI = 80888*6.2%=5015

HI = 80888*1.45%=1173

Total FICA tax withheld =5015+1173=6188

(b) Parkers self employement tax on income derived will

OASDI =60000*12.4%

=$7440

HI =60000*2.9%

=$ 1740

as self employed person has to contribute OASDI @12.4% and HI @2.9%

so half of (OASDI+HI) will be shown in income statment of geroge business income (i.e 9180/2=$4590)

so self emplyoment tax on income derived on geroge will be $4590