I have a question very similar to W2 and 1099 (self employed) income in same year: social security taxable income limit?, but goes a step further.
The goal of my question is to estimate how much social security tax would be taken out from a side-hustle while earning income from a W2 that is in excess of the IRS Maximum Taxable Earnings.
Question: If an employee receives both a W2 income in excess of the IRS maximum taxable earnings, and they are also self-employed on the side, would the employer portions of self-employed social security tax still apply on the self-employment income?
For example, imagine someone works a W2 job and makes $200,000 (in excess of the social security limit). Their employer would withhold 6.2% (up to the same maximum?).
If the same someone also is self-employed and makes $10,000 through some side gig. This income would also be subject social security tax of 12.4% -- 6.2% for the employee and 6.2% as the employer.
The employees gross wages in this example, as I understand it, is $210,000 (since the income is "pass-through"). This means that up to the IRS limit (e.g. $147,000 in 2022) the 6.2% tax would be applied.
However I'm not as clear on how the employer portion works. For the self-employment portion of the income $10,000, would that also be subject to the additional 6.2% from the "employer" portion of the self-employment income?
Meaning in total with this hypothetical, the total social security taxes owed would be:
- Employee social security: $147,000 & 6.2% = $9,114
- Employer social security: $10,000 & 6.2% = $620
- Total: $9,114 + $620 = $9,734
Is this correct? Or am I missing something?
Following up on that, does the employer portion of social security also follow the same maximums? (E.g. assume $200,000 in W2 income but now $150,000 in self-employment income).
In this new example, would the employer social security portion only apply to the first $147,000 (2022 IRS limit) of the $150,000 in self-employment profit?