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Flashcards in Rates Deck (6):

SSI for employees Overall Rates

7.65% Employer and 7.65% Employee (total) = 15.3%


SSI Broken down by SSI (old age, survivors, disability)

12.6% for SSI
2.9% for Medicare


SSI broken down by employer/ee, SSI/Medicare

7.65% each
6.2% each SSI
1.45% each medicare


Maximum amount individual can contribute to a qualified defined contribution retirement plan

Ques 163 in redo Makes no sense
"Max amnt can contribute to a qualified retirement plan" now what that means IDK

It's 25% for self-employed after deduction of 1/2 SE tax and deferral, it's effectively a 20% rate, maximum $53,000 for all plans.

This is extremely confusing, if you look at a lot of the charts it says 53,000 or 100% of compensation, but it's not. Or maybe we are talking the deduction here is the 20% after netting out the self-employment tax.

Earned Income - 1/2 SETAX = Net x 20% = Deduction for SEP
But you can contribute up to 53,000, doesn't say that in Gleim answer. IRS says 25% (20% in reality) of employee compensation


Frankly I still don't think they know Question 163
Asks for "annual amount kirk can deduct as a contribution to his qualified retirement plan"

The annual contribution limit (not the deduction) is 53,000
The maximum annual contribution deduction is 20% of net self employment earnings, which is 20% of the SE earnings less 1/2 the SE Tax

he answer explanation is clarifying that the maximum amount that can be deducted is the annual contribution. The annual contribution limit is the lesser of 100% of "earned income" or $53,000. However, the deduction is further limited by the maximum annual deduction limitation of the lesser of 25% of "self-employment income" or $53,000. The difference is the contribution limit is based on earned income, while the annual deduction is based on self-employment income. Please note, this creates a circular computation because contributions to the plan are subtracted from net earnings to calculate self-employed earnings, and self-employed earnings is used to calculate the maximum annual deduction for contributions. For convenience, a standard rate of 20% is used to calculate the deduction. The 20% deduction reference can be found in SU 4.5.5.b.2.d.


Here's what it is for deductible contributions to SE retirement plans.

Lesser of 20% of Earnings after SE TAx

In other words $265,000 after taking off 1/2 the SE tax will max you out at the 53,000.

IDK why they are insisting at saying 100% of the compensation, it's not, ever, it's always 20
% up to 53,000 max.