I read through your examples and you didn't account for the change in your taxable income from line 22 to line 37, the adjusted gross, due ONLY to the SE deduction.
Of course I did. See the below, and I've put line 37 in bold since you seemed to have missed it the first time.
1040 line 22: 95,000
1040 line 36: 6,711.54 (this is the adjustment for 1/2 FICA)
1040 line 37/38: 88,288.46
Ouch I should have noted 1040 line 27/36 above as the 1/2 is entered on line 27 and in my example, line 36 is identical which is where it gets subtracted from line 22 to give line 37/38.
Now as to your examples, I find them VERY confusing.
Ex 1: You imply that 1336.66 is the total FICA
Ex 2: You imply that 1554.25 is the total FICA, at least per this claim that there is a difference in payments between examples 1 & 2
The difference between the two payments 1554.25-1336.66=217.59
What the heck, how do you get ANY difference? Total FICA is computed ONLY on SE, and is entered DIRECTLY on 1040 line 58. There are NO deductions for FICA, other than the 0.9235 computation on the SE. The deduction for half of FICA's impact on INCOME TAX is what is accomplished on line 27/36 of the 1040. The correct total FICA for both of your examples 1 & 2 is in fact 1554.25. 1336.66 is not a number of ANY validity in EITHER the FICA computation OR the INCOME TAX computation. It NEVER shows up anywhere on the tax return. If you think it does, please tell me which line on the 1040 it shows up on. It is a totally fictional number.
Now let's do the same exercise with your guy at 95k:
95,000
x .9235 = 87732.5
* .153 SE tax = 13423.0725
half deductible= 6711.53625
6711.53625*.28= 1879.23015
Total SE minus the deduction allowed 13423.0725-1879.23= 11543.8425
using the gross income: 11543.84/95000= 12.15%
using the equivalent income: 11543.84/87732.5=13.15%
A person with employment income equal to the equivalent of 87732.5 pays 6711.07 and his employer pays 6711.07 for a total of 13423.07
11543.84/13423.07=86%
What complete poppycock. The SE shows 13,423 and so does 1040 line 58! They are freaking identical. Your computation of the SE total - a marginal tax rate x 1/2 the FICA deduction (how much your INCOME TAX is lowered by, and that is simply correcting for the 1/2 of FICA which is suppose to be income tax neutral i.e. the "employers" half of FICA) is a totally meaningless number. You take that INCOME TAX deduction and for God knows why, subtract it from FICA, which gives you a meaningless number and then compute another meaningless number and claim this is the effective FICA rate.
The number 11543.8425 again is a totally fictional number and never shows up anywhere on the tax return in either the FICA or income tax computations. It is a confused mixture of FICA numbers and marginal income tax saved on the "employers" half of FICA. You are the one beating me up for claiming that we not should mix FICA and income tax, since the government does not keep them separate, yet here you are the one who can't keep them apart and have confused yourself by mixing units so to speak.
ROTFLMAO!
Edit, I had a few wording errors which are now corrected. |
