Self Employment Tax?

1 Answer

Answer :

Self employment tax is the payment of Social Security and Medicare taxes for those having more than $400.00 of self employment income per year. The self employment tax is in addition to any income tax the self employed individual may owe. Just as employees must have a percentage of their gross income withheld to pay their Social Security and Medicare taxes, a self employed taxpayer must pay Social Security and Medicare taxes also. For the calendar year 2011, the Social Security tax is 10.4%, plus 2.9% for Medicare taxes. Since there is no employer to pay _ of the tax, the self employed individual must pay the entire amount. Any self employment income above $106,800 is not subject to self employment tax. The tax is calculated and reported on Schedule SE. However, the individual must first complete Schedule C Profit or Loss from Business, or other appropriate schedule to report self employment income. The gross amount of self employment income is not taxed, as the taxpayer may have deductions that reduce gross self employment income. These deductions may be vehicle expenses, utilities, meals and entertainment, depreciation of equipment, professional fees and licenses, etc. If the business has a net loss, no self employment tax will be owed. Interest, dividends, rents and royalties are not subject to the self employment tax. Capital gains are not subject to the tax either. Self employment tax must be paid even if the individual is receiving Social Security retirement benefits. Once the net profit or loss is calculated, profit is reported on Schedule SE. Only 92.35% is used to calculate the self employment tax. After that is deducted, 13.3% of that amount is what is owed for the self employment tax. The IRS provides a deduction equal to _ of the self employment tax owed. This deduction may be used whether or not the taxpayer itemizes deductions or uses the standard deduction. The tax is paid with income taxes owed. Self employment tax must be paid even if the individual is receiving Social Security retirement benefits. If the taxpayer expects to owe more than $1,000 for taxes, including the self employment tax, they must estimate their tax obligation and make payments to the IRS four times per year. Many self employed individuals are required to make estimated tax payments. The estimate should be based on income tax and self employment tax together.

Related questions

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Last Answer : Check this list from the IRS. If you can answer "yes" to any of them, you need an EIN. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Do-You-Need-an-EIN%3F

Description : What is the Social Security tax rate for 2011 on self-employment income?

Last Answer : The tax rate for Social security for 2011 will vary depending on what money you made. You will pay 10.4% on an income of $106,800. It may vary more depending on how much or little you made.

Description : What resources, information, tips, and/or advice do you have for someone who is considering self-employment?

Last Answer : Check with your local Board of Health. It's likely that you will not be permitted to bake commercially in your home kitchen. (Not that that is never done, but if you do commercial food preparation ... , or diners that are only open for breakfast and lunch, and are closed on nights and weekends.)

Description : What should I know about "informal" self-employment?

Last Answer : answer:Start with and develop something you are really good at. Shotgunning a lot of things you are marginally good at will usually just get marginal results. Add to your repertoire as you get work/gigs and a ... really good at. One last piece of advice .do not take on a partner EVER!! Good luck.

Description : What is self-employment ?

Last Answer : Self-employment is called self-employment. To put it more clearly , self-employment is the process of earning one's own living by taking one's own or borrowed resources , using one 's own thoughts ... from it. In fact, most of the working population of a country is engaged in self-employment.

Last Answer : Self-employment To say Own Initiative Money To earn Refers to. Own Capital Or Debt To do Short Resources , own Intelligence , skill With Of work Through Money Earnings To do Who Self-employment Says.

Description : The Sacrifices and Advantages to Self Employment?

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Description : As an corporation, am I responsible or liable for depositing employment tax?

Last Answer : Yes, you are responsible for depositing employment tax. The liabilities for the tax are split between the corporation and the business owner

Description : Okun’s law shows the relationship between the following : (a) Unemployment and Growth (b) Employment and Growth (c) Tax rate and Tax revenue (d) Inflation and Employment

Last Answer : (a) Unemployment and Growth

Description : Where does a self employed person obtain a tax identification number from?

Last Answer : If you want to obtain a tax identification number and are self employed, it can be done online. All you have to do is answer a few questions to the IRS, you will be issued a number. It must be activated strictly by the IRS database.

Description : What is the best tax software for self employed individuals?

Last Answer : I would suggest H&R Block tax software. This is a place where you can get your tax sorted out without much stress, and with easy to use actions and great results, H&R block is a great service.

Description : Tax Software For The Self Employed?

Last Answer : I would have to go with TurboTax! Turbo Tax guarantees to provide you your maximum tax refund. You can easily start your taxes free today and only pay when you are ready to file your return, if you ... helped me this year (just remove the spaces) yazing. com /deals /turbotax Best of luck, friend!