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If you can´t trust your mum who can you trust:hehe:
haha, thats why im checking up with everyone, cuz i dont want the self employment:angry:!
Yes, you owe self employment tax on that income.
mjlapoin wrote:haha, thats why im checking up with everyone, cuz i dont want the self employment:angry:!Most definitely, you do have to.
You can set up an SEP IRA and reduce your taxes somewhat by dumping the max amount into the account. The more you earn, the more you’re allowed to invest… Of course you won’t be able to touch it until retirement… But it’s better than giving it to the tax man…
Let me tell you how it will be
There’s one for you, nineteen for me
Cuz I’m the taxman, yeah, I’m the taxmanShould five per cent appear too small
Be thankful I don’t take it all
Cuz I’m the taxman, yeah I’m the taxmanIf you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feetTaxman!
Cuz I’m the taxman, yeah I’m the taxmanDon’t ask me what I want it for (Aahh Mr. Wilson)
If you don’t want to pay some more (Aahh Mr. Heath)
Cuz I’m the taxman, yeah, I’m the taxmanNow my advice for those who die
Declare the pennies on your eyes
Cuz I’m the taxman, yeah, I’m the taxmanAnd you’re working for no one but me
Taxman!It’s the same situation as we face with William Hill earnings – you have to declare tax on that earnings. If your accounts are audited and it’s seen that, not only have you not paid due tax, but that you have intentionally not declared it, you may find yourself in far more trouble than simply having financial penalties.
Not worth the risk.
Your mom is right. The self employment tax is a standard $400.00 tax that all selfemployers pay annually, there’s no deductions or safe avenues for tax diversions available to reduce this amount.
Good news though is that you have write offs for for all expenses encured during each fiscal year. Included are office expenses such as the amont of space you use as an office. Some of your utilities can be declared also. There are many other deductions available.
Don’t we all wish the self employment tax was some kind of flat $400 fee!
That’s not it at all. Self employment tax in the US is the Social Security and Medicare tax that is normally half-paid by the employer and half-paid by the employee. When you don’t have an employer, you must pay the entire total yourself as self-employment tax on Schedule SE.
The 2006 rate is 15.3% percent for income up to $94,200, and 2.9% on all income above that.
You better check that again. That $400.00 tax is upfront when you fill out your income tax. I’ve paid this tax for the past 8 years.
From the IRS website:
Quote:Self-employed individuals, sole-proprietors, independent contractors and persons who have net earnings of $400 or more are required to pay self-employment tax by filing Schedule SE (PDF), attached to their Form 1040, U.S. Individual Income Tax Return.Maybe that’s the $400 you’re thinking of?
If your self-employment income is less than $400, you’re off the hook, otherwise Schedule SE will hit you up for the 15.3% I mentioned in the previous message.If you’ve been paying $400 instead of 15.3% of your income, I’d say you have an unpleasant surprise coming.
That is what I’ve been paying generally as a flat fee. The reason I’ve been able to get away with this is because my selfemployment generally involves a lot of travel and other expenses. As I’ve noted there are a many ligitamate writeoffs that reduce the amount of taxes owed. Being selfemployeed allows you to take advantage of these. However, don’t be misslead into thinking this can be abused. I always have mine done by a professional who’s knowledge is better than mine.
Only 15.3%??
Here in the UK most earnings are at 22% rising to 40% if you go over a certain limit! We also have to pay national insurance which if memory serves me rightly is 8% of profits.
That’s just the self-employment tax part. In addition, the personal income tax rate is anything from 15% to 35%. Plus, most states add another 5% to 10%.
