Self-employment tax

1. 73

   David 470posted 14 years ago

   How does self employment tax work?  I was reading something about it, but do not entirely understand it.
   
   Would I have to file next year even if it was only few hundred dollars? (do not know how much I'll make the next couple months)
   
   Also, how much in tax %?  I do not want to get in trouble with IRS. My grandma got audited by them for stupid reasons that were not her fault.

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2. 83

   habeeposted 14 years ago

   SE tax is what you have to pay if you work for yourself. It's like Social Security. I can't remember what the % is - I think it depends on how much you made.

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   1. 73

      David 470posted 14 years agoin reply to this

      What would I be considered sole proprietor, or a trade/business?
      
      I am reading this: asks what type
      http://www.irs.gov/businesses/small/art … 46,00.html

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3. 70

   lrohnerposted 14 years ago

   They just dropped the SE tax 2% so it's now 13.3%. Also, you can now deduct your insurance premiums before calculating your SE tax.

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   1. 73

      David 470posted 14 years agoin reply to this

      13? Oh, I was just reading something and it said 15 %. Outdated article I guess. Thanks for saying.

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      1. 0

         Donna Ferrierposted 14 years agoin reply to this

         You may also not even make enough money to pay the SE tax. I can't remember what the threshold is, but there have been years where I haven't made enough money to pay it.
         
         BTW, you also have to make a certain level of income before you're allowed to deduct insurance. I didn't make enough last year to do so, even though I have in past years, so there's a threshold for that too.

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4. 0

   Nelle Hoxieposted 14 years ago

   You can probably just visit your state's website and the IRS website to get all of the info you need for paying state and federal taxes. Or you should spend the bucks for an accountant.
   
   The first year you are self-employed can be confusing, so a pro is a good idea to get off on sound ground.

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   1. 73

      David 470posted 14 years agoin reply to this

      Yeah, 2011 will be my first "full year" of SE. I think I need to of made $600+, but I am not sure if that means just this year, or part of next year too.

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   2. 70

      lrohnerposted 14 years agoin reply to this

      Best advice ever, Nelle. Can you drop me a line when you get a sec? My computer died along with all of my contacts. I want to run something by you. And Happy Holidays!

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      1. 63

         Ben Evansposted 14 years agoin reply to this

         It is around 15%.  Basically double what is deducted from you paycheck and you will know how much your self employment tax is.  Half of this tax is deductible from your taxable income.

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