Taxpayer is married and has a business that is a specified services or trade business (SSTB). She has no employees. Taxpayers spouse has w-2 wages. Based on current projections of income taxpayer will have $200,000 of earnings from her business before considering self-employment taxes, and spouse will have $165,000 of salary. They also have $985 of taxable interest income.

Question 3a. Compute total tax liability including income tax, se tax, high-wage surtax, and Net Investment Income tax (NIIT). Assume standard deduction. Use the 2021 tax tables, etc. Hints: 1. you will need to compute SE tax, deduct of the SE tax as an adjustment to income and compute the 20% QBI deduction. This requires you to understand the difference in the Sch C income vs. net earnings from self-employment, and then the impact of the SE tax deduction on the QBI calculation. 2. The high wage surtax is a joint calculation based on a joint threshold.

Question 3b. Change in facts: Spouse has had a great year at his work and will be paid a significant bonus. The amount of the bonus is $100,000. This makes his total compensation $265,000. What is the tax cost of the bonus (income tax, employee portion of Medicare tax, high wage surtax and NIIT)? Hint: 1. what is the impact on the QBI deduction of spouses additional income? 2. NIIT should be the same.