Paul Warren is a self-employed mechanic. Last year he had total gross earnings of $44,260. What are Paul’s quarterly social security payments due to the IRS?

To calculate Paul's quarterly social security payments, we need to determine his self-employment tax. The self-employment tax consists of both the Social Security tax and the Medicare tax.

First, let's calculate the Social Security tax. The Social Security tax rate for self-employed individuals in 2021 is 12.4%. However, this tax is only applied to a maximum earnings threshold, called the Social Security wage base.

In 2021, the Social Security wage base is $142,800. This means that only the first $142,800 of Paul's earnings will be subject to the Social Security tax.

To calculate the Social Security tax, we multiply Paul's earnings subject to the tax by the tax rate:

Social Security tax = Earnings subject to tax * Social Security tax rate

Since Paul's total gross earnings are $44,260, and only the earnings up to the Social Security wage base are subject to the tax, we need to find the minimum value between his earnings and the Social Security wage base:

Earnings subject to tax = Minimum (Total gross earnings, Social Security wage base)

In this case, the earnings subject to tax will be $44,260, as it is lower than the Social Security wage base. Now we can calculate the Social Security tax:

Social Security tax = $44,260 * 0.124

Next, let's calculate the Medicare tax. The Medicare tax rate for self-employed individuals in 2021 is 2.9%. Unlike the Social Security tax, there is no maximum earnings threshold for the Medicare tax. It applies to all of Paul's earnings.

To calculate the Medicare tax, we multiply Paul's total gross earnings by the Medicare tax rate:

Medicare tax = Total gross earnings * Medicare tax rate

Medicare tax = $44,260 * 0.029

Now that we have both the Social Security tax and the Medicare tax, we can calculate Paul's quarterly social security payments:

Quarterly social security payment = (Social Security tax + Medicare tax) / 4

Substituting the calculated values:

Quarterly social security payment = ($44,260 * 0.124 + $44,260 * 0.029) / 4

Quarterly social security payment = $16,825.14 / 4

Therefore, Paul's quarterly social security payments due to the IRS would amount to approximately $4,206.28.