Methods for Computing Self-Employment Tax (continued)

Regular Method Step 2: Determine Net Earnings

The second step of the regular method is to determine the net earnings from self-employment. Use this formula to determine the net earnings of a business:

Net profit x .9235 = Net earnings (before self-employment tax is calculated, net income is reduced to 92.35% of net profit to account for employer equivalent share of FICA tax (7.65%)).

The net earnings from Alyssa's grocery store are: $65,700 x .9235 = $60,674