FICA tax on self employment

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Let's assume a person is self-employed and earns $100,000 and his spouse, $60,000. Those earnings are properly entered for he and his spouse under earnings as "self employment earnings." When looking at the Social Security folder this user then copies those earnings forward under Social Security future earnings. (this is a mistake).

We would expect the husband's FICA to be 100,000 x 0.9235 x 0.153 = $14,130 and the wife's should be $60,000 x 0.9235 x .153 = $8,478.

However, because the user copied earnings over to future, the result will be that his FICA tax is not calculated correctly because he wrongly copied these self-employment earnings forward as if they were already covered by Social Security. As far a Future Covered Earnings go in this SS area, employee wages means employee wages and nothing more.

The .9235 = 1 - (.0620 + .0145) puts self employment income on the same footing as employee wages by adjusting the self employment income for the portion of FICA that is paid by your employer on employee wages. In other words, when you have employee wages, you don’t pay FICA on the FICA paid by your employer.

When the employee wages are removed from the future covered earnings area, the FICA is calculated exactly as expected.