For sole proprietors, Schedule SE (Self-Employment Tax) is probably the most hated tax forms. The purpose of the form is the dreaded self-employment tax, the charge paid by all self-employed. The purpose of this article is to explain the reason for this duty and the resulting hatred.
If you own a small business that is not a partnership, a company or a multi-member limited liability company, your company is likely to be a sole proprietorship. They may not even for a “small business”, but in the eyes of the IRS, a single proprietor can only belong dass Other titles for this esteemed designation self-employed, independent contractor, consultant or freelancer. The result is the same: you need your business income and expenses on Schedule C, Profit or Loss from the Annual Report.
If your earnings from self-employment, activity is more than $ 433, you not only have the federal income tax on the winnings, you must also pay federal self-employment (SE) tax on the profits. In 2008, if your Schedule C income is less than $ 102.000, your SE tax is calculated by this formula: Net profit x 92.35% x 15.3%. If your Schedule C income of more than $ 102.000, use the formula above, and an additional 2.9% on earnings above $ 102,000.
So this is the calculation behind the wheel. The tax itself is easy to assess the ability of the government social security tax (12.4%) and Medicare tax (2.9%) on the individual merchant. When adding 12.4% plus 2.9%, you get 15.3%. And now we come to the crux of the matter: This 15.3% is actually twice as much as an employee would pay for social security and Medicare tax, since the employee pays only 6.2% and 1.45%, for a total of 7.65%. The employer then pays the equivalent of 7.65%, and if you add the two, the employee and the employer together pay the same 15.3%. Sole owner pays everything themselves, while the employee and employer each paying half.
So now you know why this as the “feared” is well known SE taxes. Why the self-employed person should pay twice as much as the workers? An answer to this question lies beyond the scope of this article, of course, but at least understand what is happening, and why individual entrepreneurs shaking his fists in anger at the mere mention of Schedule SE.
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Accounting Services: All you pay for the accounting, financial statement preparation, payroll, payroll tax return preparation, tax return preparation are, sales tax preparation, tax advice, etc. are deductible.
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