Question

Samir is a self-employed marketing consultant. He had no income from January through March 2020. His April through December 2020 income subject to SE tax is $55,000. Samir's SE tax for 2020 is $7,771 [$55,000 x 0.9235 x 0.153 = $7,771]. Samir may reduce his estimated tax payments by how much? Hint: USE Form Schedule SE to help you find the answer. $2,849 $3,886 $3,149 $6,298

Answer 1

Answer:

$3,886

Explanation:

A self employed taxpayer can deduct the employer portion of self employment taxes that he/she pays during the year. In this case, total self employment taxes are $7,771 x 50% = $3,885.50 corresponding to employer taxes (the other 50% are not deductible since they correspond to employee taxes).

Self employment taxes include Medicare and Social Security taxes (FICA taxes basically).