| Despite the fact that you pay more taxes self | | | | then you will not owe a thing. |
| employment does have it own set of advantages. | | | | Then you take your net earnings and multiply it |
| I sure you are aware of them. But now it is time | | | | by .0124. This will tell you what your social |
| to get you taxes in order so that means you | | | | security tax is. Remember that you only have to |
| would most likely be using form 1040 Schedule | | | | do this for the first $87,900. |
| SE. There is a long version calculation on page 2 | | | | After that you take the full amount of your net |
| but that is mainly for church employees, ministers, | | | | earnings and multiply it by 0.029. This tells you |
| and clergy. | | | | what your Medicare tax is. |
| Since you are a self employed person you do not | | | | Take the two totals and add them up to get |
| get the same benefits as an employee. You must | | | | your total self employment tax. |
| pay the full 15.3% of taxes not the 7.65% | | | | Now here is where that self employment benefit |
| employees pay. That is 12.4% for Social Security | | | | kicks in. You get to divide that total by 2 as your |
| tax on the first $87,900 of earnings and 2.9% of | | | | self employment tax deduction. |
| Medicare tax on all earnings. Normally your | | | | Now there are other tax calculations that you can |
| employer would spit this with their employees but | | | | try if your income is less than certain amounts so |
| since you are on your own then it is up to you. | | | | try to calculate those as well. See which one |
| As you can see self employment tax can be little | | | | gives you better results. At least it is nice to |
| more work and cost you more. But their is a | | | | know that in the end you get a deduction so you |
| short form tax calculation that you can use to | | | | will not have to pay as much as you think. |
| make this simple. | | | | If you are one of those people who need to use |
| You start by taking you income you gained | | | | the long version then don't worry. There is just a |
| through last year and multiply then by 0.9235. This | | | | few more steps and it is quite simply to use. You |
| will tell you what your net earnings for self | | | | can find it on the IRS website. |
| employment tax. If the total is less than $400 | | | | |