Comments on: Self Employment Tax

By: How to Create a Personal Finance Firewall | Frugal Dad

How to Create a Personal Finance Firewall | Frugal Dad — Wed, 11 Nov 2009 10:02:26 +0000

[...] with business activities hit my bank firewall account I immediately initiate one transfer to my self employment tax sinking fund for roughly one-third of the gross amount. The remaining amount is transferred to my [...]

By: JMGN

JMGN — Wed, 29 Jul 2009 16:20:47 +0000

I was layed off end of May and will start working on a contract basis in a few weeks. As I sit here on hold to collect unemployment benefits for the first time in my life, I am wondering what will happen if my contract ends and I have no work. Will the NJ state tax I pay include unemployment insurance? Or do self-employed individuals have no claim to unemployment benefits?

By: ladybugz

ladybugz — Wed, 10 Jun 2009 00:28:45 +0000

I am an independent contractor for the 1st time, just graduated, I just sent off a payment for the quarterly federal tax due June 15, which was 30% of my net income. What percentage of my net income should I use for California quarterly state tax as self employed? Does anyone know? Thank you for your assistance.

By: * Self-Employment, Estimated Tax, and Safe Harbor

* Self-Employment, Estimated Tax, and Safe Harbor — Fri, 05 Jun 2009 00:46:11 +0000

[...] Self-employment tax is basically the Social Security and Medicare portion of your taxes. When you work for someone else, these taxes are withheld on your behalf. However, as a self-employed person, you’ll have to pay these taxes in addition to income tax. The self-employment tax rate is 15.3%, which consists of two parts: 12.4% for Social Security and 2.9% for Medicare.What Is Estimated Tax? [...]

By: -> Don’t Forget To Make Your Estimated Tax Payment For Self Employment Income! | Bible Money Matters

Tue, 14 Apr 2009 23:10:36 +0000

[...] also need to pay your state estimated taxes (if your state has income tax) in addition to the self-employment tax of 15.3% (the social security and medicare portion of your tax). It can be easy to [...]

By: Bible Money Matters

Bible Money Matters — Tue, 14 Apr 2009 20:19:39 +0000

I just finished my first estimated tax payment, and man, that sucks. It’s like 15% for federal taxes, 15.3% for self employment tax and then another 7.05% for my state tax. It’s enough to make me wonder if it’s all worth it! I wish they would just allow me to keep some of my own money!

By: frugal grandma

frugal grandma — Mon, 13 Apr 2009 17:13:10 +0000

I have been paying self-employment taxes for over 18 years now. Although I have been a low-income earner I have ben paying them at the same rate as someone with a good job, as self-employment taxes do not distinguish between the poor & the rich.
In 2008 I had a really bad year. At first I was happy to learn that I was not even required to file a return, as my income was too low; then I saw that because I was self employed, actually I still owed taxes. Even someone who only made $400 the whole year is required to pay self-employment taxes, whereas if I had been working for someone else I could have made up to $8,850 and not owed anything, including Social Security’s cut.
Does that seem fair to you?

By: LinderLou

LinderLou — Sun, 05 Apr 2009 23:48:16 +0000

30% seems pretty high to me. I’ve been self-employed for at least seven years now, and learned the hard way about self employment taxes. In most situations, you “pay” 15.3 percent for SS and Medicare, but you get half of that credited back to reach your adjusted gross income on your 1040 (I’m also a tax preparer). That leaves federal and state income tax. Unless you want a large refund – and you shouldn’t because it gives the Feds an interest-free loan on your money – don’t overwithhold. And don’t forget that the govt. just changed everyone’s withholding requirements so you get to keep a little more.

By: TJ

TJ — Fri, 03 Apr 2009 15:11:38 +0000

a few questions for a newbie looks for advice (and i know i can hire an accountant). The situtation – my wife started self employment last November as a part time engineering consulting to one company. She makes roughly $500/month – so when i did the taxes with turbo tax home & business it showed a slight loss with the deductions that were taken. we’ve since filed papers to become a single member LLC and everything went through with mycorporation.com. a few questions:

-do we need to pay estimated SE taxes? this $6000 estimated income ($500/month) will represent a small fraction (roughly 1/15-1/20th) of our total gross income with my regular job. we typically receive large tax refunds every year ($5-6k).

-i read about the “safe harbor” rule – where there would be no penalty if you paid at least the amount of taxes you had owed the year before. is that for only the SE taxes or our combined taxes? (if combined – we’d be in the clear since we received a refund – right?). if SE – we didn’t pay any since the Self employment took a small loss since it started in November and the income didn’t cover the deductions – so we’d be in the clear this year to since we didn’t owe any for 2008?

-if so, i read you don’t need an EIN # for single member LLCs – if so, when you enroll at EFTPS (Electronic Federal Tax Payment System) – do you enroll as a business (they ask for an EIN #) or an individual?

-if SE payments are needed – what happens if your income significantly increases significantly the 2nd half of the year. do you just change your estimated payments for half way through – would there be any pentalies?

By: DDFD at DivorcedDadFrugalDad

DDFD at DivorcedDadFrugalDad — Thu, 02 Apr 2009 11:03:43 +0000

The sinking fund is the only sensible way to avoid the tax surprise. As a business owner it is up to them to manage this– an accountant can definitely help too.