Compute Lenny’s estimated tax payment for the third quarter. He is self employed and he expects to earn 42,800 this year. His estimated income tax rate is 18%. For self employed persons social security is 12.4% of wages up to 128400 and Medicare tax is 2.9% of all wages
First, we need to calculate Lenny's estimated income tax for the year.
Income tax = $42,800 * 18% = $7,704
Next, we need to calculate Lenny's estimated self-employment taxes for the year.
Social security tax = $42,800 * 12.4% = $5,299.20
Medicare tax = $42,800 * 2.9% = $1,241.20
Total estimated self-employment taxes = $5,299.20 + $1,241.20 = $6,540.40
Finally, we need to calculate Lenny's estimated tax payment for the third quarter. Since Lenny is self-employed, he is required to make quarterly estimated tax payments. The total estimated tax for the year is $7,704 + $6,540.40 = $14,244.40.
Lenny's estimated tax payment for the third quarter would be 1/4 of this amount, which is $14,244.40 / 4 = $3,561.10.
Therefore, Lenny's estimated tax payment for the third quarter is $3,561.10.