Ideal Salary calculation

[Tom Poje]

Ok, its cold here in Florida and my brain is frozen.

Schedule C income = 200,000.

I used to take

200,000 * .9235 (I guess that is really 1 - .0765) = 184,700

lesser of this value or Taxable wage base * 7.65% [106,800 * 7.65% = 8,170.20]

comp in excess of TWB * 1.45% [77,900 * 1.045% = 1,129.55]

9299.75 for the FICA.

Beginning in 2011 the employee tax rate is 4.2%, how does this change the calculation.

[Guest KVAlbert]

Wouldn't it be the same calculation? The .9235 adjustment is to adjust for the employer deduction. The employer piece of the SECA tax has not changed.

[Tom Poje]

so the sched C income is after the employee tax is taken out? I plead complete ignorance in regards to this area.

[Guest KVAlbert]

The schedule C is before the employee tax. The tax is computed on Schedule SE. The .9235 factor is the adjustment to the Schedule C for the employer share of the tax. The employer piece is the amount you get to deduct on the 1040. The amount of the deduction does not change under the new law but the total amount of SECA tax will be less.

[Bird]

Right, the reduction in tax is for the 'EE part, and the adjustment to subtract "half" of the SE tax was to take into account the 'ER part, and there's no change in that. Your old formula is fine but if someone were to literally use half of the total SE tax that would be wrong.