Why do self employment pay more taxes than everyone else?

[lasher66]

I just think it is a crock that we have to pay more taxes than the average tax payer. At least thats what it looks like to me. If I am not mistaken, arent we paying an additional 15.3% of our profit to the irs more than every other taxpayer? Just had to vent because I realized I came up about $2000 short for taxes .

Lasher

[Bob Minney]

Tax is the same for self employed or job for wages.
Only thing on wage job is paycheck shows 1/2 withheld from paycheck, other half is paid in by employer.

[odin]

bob's right also you get a half of that tax as a deduction

[Floridalandcare]

My 2 cents is find yourself a good CPA youd be amazed at the deductions that are out there for our benefit>

[Darb]

It amazes me the number of people on this site that own their own business that vote for people that RAISE the taxes.

[Lanelle]

Remember that Social Security and Medicare (FICA) are politically sacred cows. No politician is going to reduce old-age benefits unless under duress. Self-employment tax is FICA. Demographics are working against the social security $$ pool now so don't expect a reduction there. The income tax rate is an entirely different issue.

[odin]

Absolutely true lanelle

We gonna kick granny smith who only draws social sercurity out in the street.This may be hard to beleive but there is a whole lot of old people thats all they got comeing in.
Thats one tax i aint gonna complain to much about. I think my old man deserves it he fought war world 2 for me so i dont mind paying a tax if need be for him.

[bubble boy]

i thought bush was lowering taxes:confused:

the way i see it the US has burdens now it didn't have a couple of years ago. security is a concern, and to keep your militay going costs $$$. thats got to get paid. i would gladly pay more in taxes to my government if our military was getting its fair share...

[devildog]

Incorporate and take the tax benefits. with regards... devildog

[John Allin]

I would take issue with Devildogs statement.
Most accountants will tell you that Sole Props filing cash basis returns have a distinct advantage tax wise... liability issues aside.

[HBFOXJr]

The employee pays 7.65% and the employer pays 7.65%. You as a sole prop. company owner pay 15.3% which shakes out the same if you think of it as paying 7.65% personally and 7.65% from the business. There is no discrimination either way on this matter.

[dmk395]

Paying too much in taxes, you say? Maybe you should find another accountant.

[lasher66]

Well, the reason I think I am paying to much for my lawn business is because I have another part time job and my wife works also. We file jointly because my tax software tells us its best. When I entered the info from our other jobs, (salary, fed withholding) for now I am just using the year to date on our pay check stubs to get a rough figure , my program shows that we should be getting back around $3100.00 . When I do the Lawn business part , (scedule C) after all my expenses and depreciations, I have a taxable income of $15,200. So now it wants me to pay $2500.00 to the irs. To sum it up ,I lost the $3100 and now I have to pay $2500. Just because of the lawn business income. That is a total of $5600. That like almost 40% tax on my Lawn income.I thought I would break just about even at tax time. Maybe I will just go to an accountant and have them figure it. Does this sound right to you guys?

lasher

[bubble boy]

i don't live in the U.S. but i doubt $15,000 would have that affect...woudn't here. maybe try H&R block if you don't want a full accountant bill.

[Bob Minney]

Last years rate-married filling jointly $15,200 = $2,734 income tax
$15,200 @ 15.3% = $2,325
so without seeing your exact situation it sounds about right.

If this is the 1st time you have done business taxes and you're not sure of what you're doing, you really should go see an accountant. They can make sure you get all deductions and avoid underpayment penalties. They can also help you get started with quarterly filings.

[odin]

lasher

Did you make quarterly estimated tax payments?If this wasnt the first year you filed a schuedule c and you didnt make quaterly payments look for a penaty.If its your first schudule c your all right.

[bubble boy]

wow, so you pay on the income as both biz and personal??? here for sole prop it just adds to other income. as corp you pay income tax as normal on salary and corporate tax on company net profit.

[Bob Minney]

bubbleboy

ours is the same way just a convoluted way of getting there

we have a sliding scale income tax
starts at 10%

and on the 1st 76,000 income we pay 15.3% social security/Medicaid tax - after that ceiling you pay the Medicaid portion only.

when you pay the 15.3% on business income it is paid after business deductions but before personal deductions. Income tax is paid after personal deductions. (and business deductions)

[bubble boy]

so if my net income before drawings for a sole prop is $20 000, and i draw $10 000 do you pay 15.3% on the $20 000 and then personal on the $10 000 ? in other words, do you pay twice on the $10 000? i wouldn't think so...

here the $20 000 is just taxed at your personal rate, no tax for the sole prop...

in my above scenerio you pay corporate taxes for your inc. after salary.

[Bob Minney]

Its really all one tax just that somethings are exempt from portions of that tax.

As a sole prop. instead of paying 25.3% tax on your business income
25,000 gross sales
5,000 business expense
20,000 net business income sole prop.
pay 15.3% of that in SSE (retirement portion)

20,000 income
5,000 personal deductions-such as mortgage interest, IRA etc
15,000 taxable income @10% ( for all other federal programs)

so with my example you would pay 3060 + 1500 = 4560 tax or 22.8%

If I'm not explaining well you need to know that the book I buy to help with taxes is over 750 pages and has changes every year.

[bubble boy]

i think i get what you're saying.

i am up north so its just curiousity anyhow.;)

[lasher66]

Originally posted by odin00
lasher

Did you make quarterly estimated tax payments?If this wasnt the first year you filed a schuedule c and you didnt make quaterly payments look for a penaty.If its your first schudule c your all right.

This is my second Schedule C. But my first year I didnt make a hole lot and I was able to right off most of it. Therefore, I still got a return from our other income. From what I understand is, as long as you pay enough taxes to match the previous year you will not be penalized. So if last year for example, if I had to pay $2000 at tax time. Then this year I would only be required to make quarterly payment going on that figure. Then whatever more I would owe at the end of the year will be paid at tax time (unpenalized). Then the following year would be based on the new figure. I hope I interpereted this right, I read it on the IRS web page.

Lasher

[odin]

That exactly right you can base your estimated tax on the previous years return.Your all right as long as you make those quarterly payments .
Dont take offense but if i were you id get a good accountant it truly is worth the cost for one.

[lasher66]

What questions do you ask when you call up accountants to find out if they know what they are doing? I am definitily going to go with a accountant it is just a matter of finding a good one now. Is an accountant different than a tax service? ex. H&R Block

Thanks
Lasher

[Lanelle]

Yes. A CPA is a Certified Public Accountant and a tax preparer is just that. A CPA can help you with determining if you are running your business well from a financial standpoint and make recommendations for improving the financial health of your company.

[LAWNGODFATHER]

You're paying taxes............Loose the low budget software and hire a CPA!!!!!