“It was on a reliable business site on the internet. Should be correct, right?”
Here’s an interesting one I found while looking for a Self Employment (SE) Tax calculation for a client’s use.
Quick refresh, SE Tax has 2 components that mirror Social Security and Medicare. Except, as a Self-employed person, you pay both the employer and employee portions.
- Social Security: 12.4% of the first $118,500 (for 2016). So, the upper limit of Social Security tax portion of the SE Tax is $14,694.
- Medicare: 2.9% with no limit.
So, for a small business earning $200,000, the tax would be:
Social Security $118,500 (limit) x 12.4% = $14,694
Medicare $200,000 x 2.9% = $5,800
Total = $20,494
Here’s a screen shot of Quickbooks’ web page.
Whoops, the maker of the most popular small business software in the world missed a very basic calculation on their website. They have no limit in their Social Security calculation. The limit varies by year and they don’t include the year as an input.
So, take what you see on the internet and what you hear with a grain of salt. That includes what you hear from me.
Let’s hope Intuit fixes this page.