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
http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240/~/social-security-and-medicare-tax-rates%3B-maximum-taxable-earnings
$2744.12
To determine Paul's quarterly social security payments, we need to calculate his self-employment taxes.
As a self-employed individual, Paul is responsible for paying both the employer and employee portions of the Social Security and Medicare taxes, commonly known as the self-employment tax.
The self-employment tax rate for 2021 is 15.3%. This includes 12.4% for Social Security, up to a certain income threshold, and 2.9% for Medicare.
First, we need to calculate Paul's net earnings from self-employment. For this, we subtract any allowable business expenses from his total gross earnings. Let's assume Paul had no business expenses, so his net earnings will be the same as his gross earnings, which is $44,260.
Next, we calculate Paul's self-employment tax liability by multiplying his net earnings by the self-employment tax rate:
Self-employment tax = Net earnings * Self-employment tax rate
= $44,260 * 15.3%
≈ $6,770.98
Now, we can determine Paul's quarterly social security payment by dividing his self-employment tax liability by 4 (for four quarters in a year):
Quarterly social security payment = Self-employment tax liability / 4
= $6,770.98 / 4
≈ $1,692.75
Therefore, Paul's quarterly social security payments due to the IRS would be approximately $1,692.75.