Jump to content

1/2 self employment tax calculations


Guest smhjr

Recommended Posts

Guest smhjr

I am looking for the formula to calculate half self employment tax for a sole prop by hand. I haven't had any luck on the web as of yet. The only thing I have found was some hand scribbled notes that showed the following:

Net Schedule C income = 152397.00

76200*.0765=5829.30

76197*.0145=1104.86

5829.30+1104.86=6934.16=1/2 SE

I am hoping some one could verify its correct before I used it. I assume the 76200 is used because its the taxable wage base for 2000, it is just coincidental that it is nearly half of the total net schedule C and not some sort of 1/2 calculation. So if the above example was 65000.00 of net Schedule C, the calculation would of been 65000*.0765=4972.50

Link to comment
Share on other sites

The calculation works like this:

A=Income (in this case $152,397.)

B= 0.9235 * A = $140,738.63

C=SSWB (in this case $76,200)

D=lesser of B or C (in this case $76,200)

E=0.124 * D (in this case $9,448.80)

F=0.029*B (in this case $4,081.42)

G=(E+F) / 2 (in this case $6,765.11, which rounds to $6,765)

Using $65,000, one gets:

A=$65,000

B=$60,027.5

C=$76,200

D=$60,027.5

E=0.124*$60,027.5=$7,443.41

F=0.029*$60,027.5=$1,740.80

G=($7,443.41+$1,740.80)/2=$4,592.10 which rounds to $4,592

Link to comment
Share on other sites

Tom, very nice spreadsheet. I might make one suggestion, though. I frequently run into situations where a sole prop or a partner has W-2 income from another source. You might consider adding an item which allows for that to be input and then adjust the results accordingly. Just a thought.

Link to comment
Share on other sites

Big Mike:

I never did one of those before.

Are you saying the formula is

estimated gross profits - contributions to rank and file

then add in W-2 income and proceed with the calculation?

by the way, I didn't actually create the spreadsheet. It was created by someone else based on my notes, step for step. so, I guess in that sense of the word, I did 'create' it. on the other hand, not all of the verbage is mine.

Michigan moaning

I think Barry Bonds # of homeruns at any given moment this season will be more than the number of wins the Detroit Tigers have on the same day.

Link to comment
Share on other sites

No, I'm saying that the FICA tax isn't required to the extent that it has already been paid by the individual. In my scenario, the reduction is to D (and only D). That is why my calculation splits out the 2.9% from the 12.4% portion. There is no limit as to the income that is taxed by the 2.9% portion.

Think the Giants will go 162 and 0?

Link to comment
Share on other sites

Doesn't matter how many games they win. They will lose to the Braves in the NLCS.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...