Scott Stewart is the self-employed owner of Stewart Software. His estimated annual earnings are $48,000 and he expects to pay 18% of this amount in income tax. What will be his quarterly estimated tax payment for the second quarter? (For self-employed persons, social security tax is 12.4% of wages up to $106,800, and Medicare tax is 2.9% of all wages.)
I'd say 48000 * (.18+.124+.029) / 4 = 3996
To calculate Scott Stewart's quarterly estimated tax payment for the second quarter, follow these steps:
Step 1: Calculate the income tax he needs to pay.
Income tax = Annual earnings * Income tax rate
= $48,000 * 18%
= $8,640
Step 2: Calculate the social security tax he needs to pay.
Social security tax = Total wages * Social security tax rate
= $48,000 * 12.4%
= $5,952
Step 3: Calculate the Medicare tax he needs to pay.
Medicare tax = Total wages * Medicare tax rate
= $48,000 * 2.9%
= $1,392
Step 4: Add the income tax, social security tax, and Medicare tax to get the total tax payment for the year.
Total tax payment = Income tax + Social security tax + Medicare tax
= $8,640 + $5,952 + $1,392
= $15,984
Step 5: Calculate the quarterly estimated tax payment for the second quarter.
Quarterly estimated tax payment = Total tax payment / Number of quarters
= $15,984 / 4
= $3,996
Therefore, Scott Stewart's quarterly estimated tax payment for the second quarter would be $3,996.
To calculate Scott Stewart's quarterly estimated tax payment for the second quarter, we need to consider both income tax and self-employment taxes.
First, let's calculate the income tax amount:
1. Multiply Scott Stewart's estimated annual earnings by the income tax rate: $48,000 * 0.18 = $8,640.
2. Divide the annual income tax amount by the number of quarters in a year: $8,640 / 4 = $2,160.
Next, let's calculate the self-employment taxes:
1. Multiply Scott Stewart's estimated annual earnings by the Social Security tax rate: $48,000 * 0.124 = $5,952 (Social Security tax).
2. Multiply Scott Stewart's estimated annual earnings by the Medicare tax rate: $48,000 * 0.029 = $1,392 (Medicare tax).
3. Add the Social Security tax and Medicare tax: $5,952 + $1,392 = $7,344 (total self-employment tax).
4. Divide the total self-employment tax by the number of quarters in a year: $7,344 / 4 = $1,836.
Finally, let's calculate the total quarterly estimated tax payment:
1. Add the income tax amount to the self-employment tax amount: $2,160 + $1,836 = $3,996.
Therefore, Scott Stewart's quarterly estimated tax payment for the second quarter will be $3,996.