If I have W-2 income as employee and 1099 income as SE individual, how does FICA tax paid by W-2 employer affect my SE tax liability?

[SusanY1]

The FICA tax paid by your W-2 employer doesn't affect your self-employment tax liability at all.  The two are calculated independently from one another.  

[sfoksn]

@SusanY1 

Thanks for your input. As far as I understand, SS tax is capped up to income of $137700 for 2020, but Medicare tax is taxed up to maximum income.

If I have W-2 income exceeding $137700 and on top of that 1099 income which I have to pay SE tax on, can I allow my SS tax liability to be focused on W-2 in come where employer is covering their portion?  

I understand Medicare tax would be taxed at 1.45% for W-2 income and 2.9% for SE income, and additional 0.9% on top of that on income above $200k.

[DavidD66]

If you are reporting W-2 income that exceeds the Social Security wage base ($132,900 for 2019), then you won't have to pay the Social Security portion of your Self-Employment tax tax on your self-employment income.  TurboTax will take care of this automatically.

[sfoksn]

@DavidD66 @SusanY1 

Thank you for your input. I have another follow up question regarding solo 401k contribution.

I have a few W-2 as employee and I also receive a few 1099 as income for my self employed business. I don't have any retirement plan with my W-2 employers, so I am opening up a solo 401k for 2020.

So generally speaking around 20% of SE income is the maximum employer contribution because SE income (net earning - 1/2 SE tax) - maximum employer contribution * 0.25 is roughly equal to SE income * 0.20, because employer contribution itself is deductible and lowers the net earning, which (not SE income), right?

To clarify, employee contributions up to $19500 (for 2020) can be directly contributed from the SE income calculated by net earning * 0.9235 for 1402(a)(12) deduction value, and this value is used to calculate SS tax and Medicare tax to determine total SE tax. 1/2 of the SE tax is subtracted from initial net earning, which would be my SE income.

Profit sharing employer contribution would be calculated as SE income (net earning - 1/2 SE tax) * 0.2. If this value exceeds $57k, then I would not be eligible to make employee contribution, unless I adamantly want to put in roth contribution through employee contribution (which wouldn't make sense at this income bracket), in which case I would subtract desired employee contribution amount from $57k which would be the new maximum employer contribution.

Since I have SS taxes paid by my W-2 employer, I should subtract my W-2 income from $137700 (affected income cap for SS tax for 2020), and would only be liable for SS tax on the remaining income up to $137700 (if W-2 in come is < 137700).

So calculation for remaining SS tax would be (137700 - W-2 income) * 0.9235 * (0.062*2), and Medicare tax would be fully calculated with SE net earning * 0.9235 * 0.029 up to 200k, then at 3.8% on income above 200k.

If my W-2 income is > $137700, then I would be not liable for any SS tax on SE net earning and I would only be paying Medicare tax at 2.9% up to 200k total income, then additional 0.9% on income above 200k.

This would actually change my SE tax as well, making my SE income (net earning - 1/2 SE tax) slightly higher, right?

Also.. another clarification... Total income (in consideration for SS tax income cap) would be adding up all the wages pre-tax withholding (box 1 on W-2 form) + SE income (which would already have1402(a)(12) deduction and 1/2 SE tax deduction for employer tax), right?

Does TurboTax offer any calculators for 401k contribution allocation for customers with W-2 income and SE income?

Thank you for your help!