Self-Employment and Taxation
So I just finished filing my 2011 taxes (business and personal). This is my fifth year doing so and 2011 represented my lowest income year. Last year, I didn't owe the feds anything, but this year I did! I made almost half of what I did last year, what the heck?
My question: Has anyone ever heard of the 'Self-Employment Tax' before? I looked in my other four versions of turbotax and couldn't find it anywhere.
Question 2: If it is new, is this one of those lovely Obamacare taxes?
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Answer by John Murdoch
Self-Employment Tax is similar to the employer's portion of Social Security and Medicare taxes. If you were a cubicle-dwelling wage slave you would have SSI and Medicare deducted from your paycheck--and your employer would be taxed an equal amount. Since you're the employer and the employee, you pay both halves.
For more information, look here:
http://www.irs.gov/businesses/small/article/0,,id=98846,00.html
If this is news to you, and you have been filing as self-employed for the past five years, you should most definitely see a tax professional.
J.Voss: I have definitely been paying the ss and Medicare taxes (sadly I have the very large cancelled checks). This seemed to be something additional to that. I'll ask our accountant anyway, thanks for the answers!
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- · February 24, 2012 at 5:11am
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David Knights: I can't tell from your description. Is it possible that you are talking about FICA taxes? Self employed folks don't have FICA deducted from wage, but they still owe SS/Medicare taxes. If that is what you are talking about, then you likely owed them in previous years too but failed to file properly. Consult a tax prefessional.
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