How The Self Employment Tax Works (And How You Can Avoid It!)
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- Опубликовано: 27 апр 2020
- Everything you could possibly need to know about self-employment tax is covered in this video. Who pays it, what it is, when you pay it, where you pay it at, why it exists, and how much it is. Believe it or not, self-employed individuals aren't the only people who pay "Self-employment tax". This is because the self-employment tax is known more formally as FICA taxes. Everyone with earned income pays FICA taxes including self-employed individuals, employees, and businesses on behalf of their employees.
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![14 Biggest Tax Write Offs for Small Businesses! [What the Top 1% Write-Off]](http://i.ytimg.com/vi/5YggWhLeckM/mqdefault.jpg)
You know what makes tax time SO MUCH easier? Tracking your income! (I use and recommend Personal Capital):
www.oncashflow.com/pc
I was wondering if he would ever knock over that oddly placed plant.
It's oddly placed so that it fits in the video frame haha, and yup it was bound to happen! :)
@@OnCashFlow i would have placed it under the window, still in frame, and less chance of knocking it over lol. I mean it really doesn't matter this was filmed awhile ago and I don't even need to be commenting, but here I am. Btw thanks for the video and all of info is greatly appreciated!
I kid you not, within the first 30 seconds of the video I was already thinking of how this could be turned into a drinking game! Each time his hand gets close it's one drink, if he does not get over you chug!
I have been dreading doing my taxes forever now because this is my first year self-employed, and I was so nervous I was going to mess it up. I have been watching so many different videos looking for tips on how to do it properly, and honestly at some point I decided it was time to have a bit of fun with it and see if that would calm my nerves down enough to start setting it up but obviously not doing my taxes tell the following day. LOL
I was thinking about the odd placement in wider shots - I saw your comment and couldn’t take my mind off of it. I was so distracted after seeing this statement, I had to stop watching. ROFL! It’s funny! But it shouldn’t be.
In all my years of ADHD struggle, this is the only explanation of something that made sense the first time 🙏 amazingly helpful
Thank you so much for the comment! I'm so glad that I could be helpful!
In 1 video, you answered 10 questions I couldn't find good answers for months. Thank you
Wow, that's amazing! so glad I could help you!
This was super helpful for me as I am working on growing my self-employment business! Thank you so much!
No problem! I'm very glad that it was helpful! I think that this other video that I made might also be very helpful for you!
ruclips.net/video/Yk1A-ZA4X7k/видео.html
Found your post interesting to watch. I can't wait to see your new videos soon. Good Luck with the upcoming update. This RUclips channel is very informative and effective.
Thank you very much!
Very solid info to help navigate the tax maze! Thanks a lot!
I'm glad that I could help you out a little!
By far the most coherent video on this subject
Thank you! That really means a lot to me! :)
Great video man, super informative. Subscribed!
Thank You!
Excellent video!
Thank you very much for your hard work.
Thank you so much, I really appreciate the kind comments!
Good info, thanks. I wasn't understanding why contributing to an IRA or SEP wasn't lowering my taxes owed.
So glad I could help! SE tax is not as easy to avoid compared to regular income tax if you have "earned" income!
Thank you, very clear and informative 👍
No problem, I'm glad it was helpful!!! :)
Great info man, thanks!
Awesome, so glad it was helpful!
My man, this is helpful stuff. Thank you
I'm so glad it was helpful!
Thank you! Super helpful
You're welcome! So glad that I can help!
This makes me want to abolish the IRS
Haha! You're not alone on that one!
So your saying only way get a refund just stay with W2 damn
Great video very helpful!
Thank you!
Finally a video where it is explained in clear english
So glad that it was helpful!
Social Security and Medicare won't be there for me when I retire. They barely take care of seniors now. Taxation is theft in my opinion.
I don't think it will go away because it's so engrained into our society now and seniors are among the strongest political groups. I am guessing taxes will be raised, retirement age raised, and more immigration into the u.s. for more younger people to tax. but who knows?
thumbs up thanks for the info man
Thank you very much! I hope you find some of my other videos useful too :)
I recently started my own business, things have been a crazy worldwide. i enjoy the amount of work i have but being 26 and not having any collage level education I find myself becoming easily stressed out by the desk work and red tape. I've taught myself deasil mechanics, machining, milling, hydraulics, and welding. But when the numbers and organization are needed I feel like the dumbest person on the planet. I've been a physical worker my whole life and I believe my biggest weakness is how to properly organize everything . Any suggestions for organizing things like cashflow, deductions, expenses, etc.? Also wonderful video, im trying to learn tax info and this was a huge leg up! THANKYOU!
Keep educating yourself on those weaknesses. Watch videos, listen to podcasts. Understand the basics. Make enough money in your busines and hire people that are smarter than you to do all of that for you. Focus on what you do best in your business. Let an accountant/bookkeeper do the other stuff, as long as you have a good fundamental understanding of it as a business owner! :)
Nice job I'd recommend highering a cfo as soon as possible to run that side of the business.
08:13 self-employment tax employer portion (half) is deductible from income taxes for self-employed persons
Yes, you are right!
How does this come into play for paying a spouse as an employee? I was under the impression that this could help us with taxes (which makes sense for us due to how much she contributes to the business), but it sounds like the previous self employment tax would just get divided between the two of us?
Thank you!
I'm happy that I could be helpful! :)
Thank you!!!
No, thank you for watching Melissa! :) I hope you subscribe and find some other videos of mine helpful!
Best way buy item sell for less with deductions making profit means big tax bill on your gross especially if u cross post
Ummm sorry but I don't understand lol
Great video.
Thanks, I'm glad you liked it!
Great info, I’ll be back!
Awesome! Thanks! I love talking about avoiding taxes !
I have a question on SE taxes... Can we deduct car insurance, cellphone, toll tag, and meals on our taxes?
Well possibly, if they were directly tied to being qualified business expenses. It's not a yes or no, it's a maybe.
My wife has done a large amount of work for my LLC, but has not been a paid employee up until this point. If my spouse becomes employed officially, we wouldn’t have to pay the 6% FUTA tax, but we would still be paying the FICA? For some reason I was under the impression that that amount would be lessened, but it sounds like the previous self-employment tax would just be divided between the two of us.
Yeah so an LLC is going to pass through and get taxed on your 1040 (which is probably a joint return).
Either way , your spouse as an "employee" will pay FICA and you as the "employer" will pay the other half. This is the same 15.3% combined for SE tax.
You don't have to hire your wife officially as a W-2 employee unless there are other tax strategies you have in mind. (employment laws usually don't apply the same to your spouse).
It is my understanding that you only really want to do the extra paperwork if you need to show income for her so that you can put it into a 401k (because you can already contribute to her IRA with spousal income), or maybe if you were going to do a Health Reimbursement Arrangement.
Otherwise, if your LLC is making a good amount of profit, I would rather get S-Corp election and take a W-2 for me and the rest as a distribution. If you make a substantial profit then I would get professional help for advanced tax strategies.
Zach, what’s your thought about the employer portion of FICA tax? If one’s starting salary/wage as well as any future raises or COLA adjustments already bake in the employer FICA portion, do employees really pay the full 15.4 (one half directly deducted on the pay stub, the other half indirectly through lower wages/salary)?
I think I understand what you are asking, but please restate if I didn't understand. I believe that a business sees an employee as an asset and an expense. If that employee is not either
1. Making the company more many than what they cost or
2. Saving the company more than what they cost
Then they would simply not hire/keep that employee.
Of course, the job market is much more complex than that and unions, Government regulations, etc. sometimes prevent businesses from operating as so.
Still, the employer-paid portion of FICA taxes is definitely a factor in determining the cost of an employee. One of the easiest/best ways for businesses to cut their costs and increase their profits is to minimize workers and keep only the most productive ones. "productive" meaning an employee that meets one of the two requirements listed earlier.
So I would say yes that employees do indirectly pay the full 15.3% FICA tax because otherwise, the employer portion would be baked into higher direct compensation, better benefits, or some combination of both if that company wants to attract and maintain productive employees.
i show a loss on paper can't get mortgage but I have amex plat since they go off gross total income but I am learning more money and paying less taxes
Yeah SE can be tricky with traditional financing!
@@OnCashFlow I know sound financing we use bank statements if you have to prove your income like four credit cards because they know you're using it for business you can spend a lot more than what your AGI is
As a self employed business is it possible I can set up quick books to deposit money to me through by business but set up to we’re it takes 15.3 percent each deposit to keep up with the quarterly pay
I'm not too familiar with QuickBooks in general, sorry. I would set up automatic savings where you try to save at least 25% of your SE income automatically for taxes :) SE tax, Fed income, state income. (may need more if your income is higher)
You say reduce your taxes by buying equipment, etc. Could you clarify how that factors in with the fact that the self employment tax is a deduction? And how does personal deduction factor in, if you are just starting as an artist, & your income may not be much more than a personal deduction? So I only need to buy equipment, minus the self employment tax, & minus the personal deduction? for the excess above this? Thanks.
Let's say you make a gross income of $30,000 from your business activities. If you purchase materials, supplies, equipment for your business that costs $10,000 then you would show a profit of $20,000. The $20,000 is what you would pay self employment tax on in this example, which is seperate from federal income tax. The standard deduction applies to federal income tax, not SE tax.
When do i have to pay estimated quarterly tax? Or how do i know if I have to pay them? And will i get in trouble if i just pay it all at once when tax year comes around because my income is determined by how much I sell - business expenses? Thank you
Honestly, this page on the IRS explains it very well let me know if I can try and help clarify further:
www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
Hi I find my self revisiting this video after first finding it during last years tax season. Can you help clarify what you're talking about @ 7:50 when you're saying that if a self employed person owes 10k they can deduct 5k? I owed 10k in self employment taxes last year and paid 10k, was there a way for me to have just paid 5k? Or can I now deduct 5k from my profits this year? I am feeling confused about this part and that there's something I'm not understanding. Thanks for this awesome video I learned so much!
Thank you so much for watching! If you paid $10k in Self-Employment Tax, Half of it is considered the "Employer" portion and is an adjustment to your income to reduce your AGI (Adjusted Gross Income). Technically "deduct" is the wrong verbiage, but many people use "adjustments" and "deductions" interchangeably because they do the same thing (reduce your taxable income).
You calculate your self-employment tax on Schedule SE along with the "Deduction for one-half of self-employment tax." at the very end of the document (line 13)
www.irs.gov/pub/irs-pdf/f1040sse.pdf
You will input the deductible portion of your self-employment tax on Schedule 1. (line 15)
www.irs.gov/pub/irs-pdf/f1040s1.pdf
Essentially, paying $10k in Self-Employment tax should reduce your adjusted gross income by $5k.
I hope this helps clarify! :)
@@OnCashFlow The lowering of your income via paying income tax. does that only take affect the following year? or in the same tax year? Thank you
A SEP IRA contribution is a business deduction and would effective do this, is that correct?
I believe only for other employees, not for yourself.
Thank you
No thank you for watching :)
Please help me with my question,how do I pay my taxes am self employed and I have itin.when and how?thx
Typically, Quarterly estimated taxes need to be paid, and through the IRS website is the easiest: www.irs.gov/payments
Hi, I work as a food delivery and I use my own car.. I want to include gas expenses as deduction. Can I do that? And how to provide the IRS with documentation to support me?
Yes, you can. there are two ways: Standard mileage deduction vs actual expenses. Here's an article that explains them:
turbotax.intuit.com/tax-tips/self-employment-taxes/standard-mileage-vs-actual-expenses-getting-the-biggest-tax-deduction/L0wIEUYhh
If you wouldn't mind explaining, one thing I am kind of racking my brain about is filing as an individual vs as a business? Or im starting to wonder if im confusing these two when they're the same thing.
Largely wherein the confusion lies is I was told I can go register my business (or mybself as a business), open a business account, and then pay myself out of that account. Is this different from a tax perspective? Is this more or less how it has to work on paper either way?
The lines start seeming very muddy because I can begin to see, at least hypothetically, how everything could potentially be a business expense of some form and if that were the case, it would make the most sense to have "the business" pay for it, rather than paying me who then goes and buys it, right?
There are different types of businesses that you could register such as: Sole Proprietor, Partnership, Limited Liability Company, S-Corporation, C-Corporation, etc. just to name a few. Different business structures have different tax situations attached to them. This is a much more complex question that requires a lot more than a YT comment to explain. I would search for a video on different business types on YT to get an idea of what I am referring to.
@@OnCashFlow thank you sir 🙏 and for your other reply as well
Happy to help!@@ajahncodar
But can you answer this question: I began Amazon Vine, without realizing at the beginning it is income. I'm receiving a mix of items- personal clothing (underwear certainly isn't a business or hobby expense). I went to art college, & I'm still developing my style before i can 'launch' & studying how to build concrete sculpture, etc, & instead living on a taxable IRA at the moment (with minimal needs/ no rent, not driving a car, etc). I hope to earn money as an artist, but not sure when I'll cross that line to earning income with it. How do you sort all this mess out? Is Amazon vine also requiring self employment tax? I heard of hobby tax. But underwear isn't even hobby tax. And the only 'earning' i have so far is overprice amazon vine products, only a small fraction of which i may use in practice art pieces, but also, hopefully, some art to sell, but not sure if it will /will not even be this same tax year. Can you file all such things differently/ separately, & for different quarters? (say I don't start selling art until the end of 2024?) Blessings. Peace everyone
I'm not familiary with Amazon vine. They should send you a 1099 at the end of the year based on the value of the products they send you if it is taxable. Usually your business will operate on a cash basis meaning you take deductions in the year that you paid for an expense, and you will report income in the year that you recieve it (like if you sell a product).
As a self employed person, is the money you pay yourself to live on as a draw throughout the year part of your deductible business expenses? or no?
It depends on your business structure (sole proprietorship, LLC, S-Corp, C-Corp, etc.) If you are Sole prop or LLC then no because profit is passed through 100% to you as an individual.
@@OnCashFlow Great, thank you.
@@Silentpartner2176 Happy to help!
@@OnCashFlow How would this differ for someone self-employed under an LLC?
@@warcat3d An single member LLC is usually taxed as a sole proprietorship, meaning the profit and expenses pass through to your 1040 (schedule C).
So really the taxation of LLC vs sole prop is the same, the difference is in the liability protection and having a seperate entity
Awesome video, I am in the transition year from employed to self employed.
Lets say you have $90k net income (after expenses, etc.)
My effective federal income tax on it would be 13.40% so $12,060
My effective State (AZ) income tax on it would be 2.70% so $2,430
My Self Employment Tax on it would be 15.30% so $13,770
I have one question on the deduction of the employer portion (7.65%) of self employment tax. In this situation, the deduction of the employer portion of self employment tax equates to $6,885. Does that mean that it lowers my taxable income of 90k by $6,885 OR does it mean that it lowers the federal income taxes owed of $12,060 by $6,885??
You would be my hero if you can answer this
I asked Chat GPT and it gave me a good answer, maybe you can confirm
The deduction for the employer portion (7.65%) of self-employment tax reduces my taxable income for federal income tax purposes, but not for state income tax purposes.
Meaning my federal taxable income would be reduced from $90,000 to $83,115 ($90,000 - $6,885).
Yes, the deductible portion of SE tax is an adjustment to your income on schedule 1. Therefore, it would reduce your taxable federal income by $6,885 (given your numbers). I can't speak to AZ specifically, but that's it should work with your federal income taxes.
Watching a ton of videos and it appears opting for 1099 means I'm considered a business. Is that so? 1099 videos I've seen seem to use terms like contractor, self employed, and small business interchangeably.
Yes, 1099 means that the issuer is paying you for work, but you are not their employee. Those are somewhat interchangeable phrases, with "small business" being the most broad.
I’ve seen a couple places say you don’t need to file 2021 taxes if you had no income in 2020. Is this true for self employed taxes too? All of this confuses me so much
Well I certainly hope that I can help make it a little less confusing. Technically if you are self-employed and your net earnings from self-employment are $400 or more, then you are supposed to pay SE tax.
On the other hand, if your income is less than the standard deduction then you technically don't have to file a tax return, I believe. Although, I would always file a tax return because you may qualify for credits and/or get back any withholdings you paid.
I hope that this helps clear some things up, please do not hesitate to ask if you need any more help!
@@OnCashFlowI saw someone recently saying that not filing at all can be/is considered "tax avoidance", potentially? And that you more or less have to file but don't necessarily have to pay, depending on the logistics of course. But I don't know anything about this stuff
Tax avoidance is generally referred to a legal way of paying less tax by using the tax code rules. Tax fraud is the illegal method. That's why I would always error on the side of filing anyway, even if you technically may not be required to.@@ajahncodar
Good content. Let’s say I am self-employed and my business performs in the following example. I file tax as self-employed.
Business gross income:$1,500,000
Business expense:$500,000
Business net income:$1,000,000
Is my federal income tax rate at 37% which base on that business net income of $1,000,000?
You would be in the 37% marginal tax bracket, and yes it is based on your net income.
Can you buy investments or assets as a small business expense... within the self employed business? (Ex. Using that 50k self employed profit to buy a 50k rental property or gold or stocks. ) then your profit is zero.
Unfortunately, that's not how that works haha. It would not be an expense. It would still be profit if you bought assets like that. Some assets can be depreciated. some can be written off right away.
Bummer. Thanks though
Is there self employment tax on rental income from real estate owned by my LLC?
Not necessarily. Could be considered passive real estate rental income that is not subject to SECA. I think traditional rental real estate fits this.
what software is best for my self employment, to Calculate taxes for me each time I get paid?
Not sure what is the best, but probably the best top rated accounting software will do this for you. :)
So my gross earnings for 2021 as independent contractor is 1000.00. My standard mileage deduction is about 200.00. That's the only deductions I claim. So my net profit is 800.00 15.3 percent SE tax is approximately 125.00. The 10 percent Federal tax bracket that puts me in is about 80.00. So if I understand correctly, with the 50 percent deduction of the employer part of my SE tax, about 60 dollars, my total Federal income tax should be 20.00 give or take. Does that sound close to being right?
Well the standard deduction should wipe away any federal income tax on income $12,550 or less for 2021. I'm fairly certain there are other deductions you could probably take besides the mileage deduction. With 1k income I would honestly expect $0 "net profit" or less utilizing some common SE tax strategies. I.E home office deduction, business cell phone, business meals, etc.
May I bother you with one more question. Am I allowed to use the standard mileage deduction for both my Federal taxes and my state taxes, or is that considered" double dipping"?
@@fredhoelscher3230 That's a great question. I don't have a great answer for you because I think it depends on the state and what they consider to be allowable deductions for your business. By no means is it double dipping because it should be a qualified business expense just as on your federal return I think. Sorry I can't help more!
Hey got a question.. If you qualify for Trader status and do m2m election and establish your trading business as sole prop… do you have to pay SE tax?
This is a question that may be beyond my level of comprehension, but it is my understanding that even if you qualify as a trader, you don't pay SE tax because it is not considered "earned income". Usually earned income is providing a product/service. Then again, I would consult a professional to make sure.
@@OnCashFlow thank you so much. this is what ive been reading and just got it confirmed by brian rivera who is a cpa for day traders on youtube. no SE tax. i believe pastors and day traders do not need to pay into SE/FICA tax
@@dedysetiadi2851 Awesome, I'm happy to try and help any time! :)
I own/run a digital marketing co. Do programs like TurboTax automatically deduct the 7.5 employer portion?
They calculate it for you, but you have to already have withheld your own taxes in the form of estimated payments throughout the year.
So basically it makes more sense to pay for a nice co-working space membership than to save the money and spend it on taxes, because you'll say goodbye to that money either way, so you'd might as well utilize it as an expense?
Well, Only if it makes financial sense for you and your business in the long run. Think of a business expense as spending $1 to save $0.30 (or whatever your combined marginal tax rate would be).
Sometimes it makes sense to spend $1 on your business and save $0.30 on taxes (so you really are paying $0.70 on the dollar).
Hello,
I am filling out a CSU application for college and it is asking me to input my Parents' adjusted gross income (AGI) for 2022 and my Parents' untaxed income and benefits for 2022. I know the AGI can be found on line 11 of the 1040 form on the 2022 Individual Tax Return, but I want to confirm where I can find the amount for the untaxed income and benefits? Is it line 2a where it says “Tax-exempt interest” or is it line 2b where it says “Taxable interest”? Line 2a is blank, but line 2b has an amount. Which one would I put?
Thank you very much
studentaid.gov/2324/help/parent-other-untaxed-income
Just ask them, because some of these untaxed income sources may not even need to be reported in their tax return.
I suppose that is if you assume that you even must pay the tax anyway.? If you are not a federal employee, i think that it does not apply to a person. Maybe if a person will challenge this fact you may even avoid all of this in the first place?
I'm not sure what you mean? If you don't pay the tax you can face criminal penalties :(
@@OnCashFlow Yes, according to the fact that by enjoining yourself into their scam. By filing into the system for supposed benefits, you agree to all the rules which may put you at risk of your freedom as a result of not abiding by the rules. Thus if you work for a corporation, and dont wear their uniform and follow their rules, you may not be employed very long. The government tax system is similar, you are offered to let them take care of you with this promise to care for you via retirement money and catastrophic medical by abiding by their rules of "compliance". It would appear that most people have very little courage and independence to walk truly free in a very responsible way on there own completely. However, there are plenty of ways to try to use this system and do well without raising eyebrows and remain within the letter or their law with proper preparation and creativity. But alas, many people are just lazy and want the easy way out and will just go along with the crowd to remain practically poor and subservient. Very good for sheep.
I know what you mean. I been studying this method, it's complicated (need lots of info and comprehension) and lots of forms to file. Can be done though! Good luck 🤞 let me know if you figure it ou.
awesomeness!
:)
I know this is an old video, but does anyone know if you receive a 1099-k, do you still file a 1040SE?
If it is self employment income, then yes.
Would I need to file taxes next year if I make $600 or over this year as an independent employee? Will I even receive a 1099?
Yes, and yes.
So I can account for 50% of my se tax as a business expense which reduces my net income which reduces my se tax?
Kinda, yes. There are some great free online calculators that can help visualize it for you.
What about having an S-corp? Do I still need to pay self employment tax?
You will pay FICA on your salary that you take from the S-Corp, but not the "distribution/dividend"
How often do we need to pay fica taxes ? Self employed.
Quarterly is the requirement.
Do you pay for your state, and local taxes on top?
Yes
What software do you recommend for 1099 employees.?
I use Wave Accounting but they just recently changed everything. I hear quickbooks is like a golden standard.
What I can’t figure out, is where do we put this deduction. Do we put it in deductions, or is it a business expense…?
It's actually an adjustment to income on Schedule 1
@@OnCashFlow I’m being told by a tax agent I can’t write this off.
www.irs.gov/pub/irs-pdf/f1040s1.pdf@@erikajoslin6640
People say you don't have to file unless you make 400 or more a what? A week?
The entire year, unfortunately.
No if you’re making $400 every week you’re gonna owe some money back for sure unless you have like 2 or 3 kids
I am ending the year and I only made $350 but was offered one more job task that will put me up at 550 so is that worth it if I have to pay employment tax?
$550 x 15.3% = $84.14 self employment tax. It's up to you. $200 extra and paying $85, so the task us worth $115 to you. *Assuming no business expenses
Yes, still report it on schedule C as income and expenses, but if you don't make a profit, then you won't pay SE tax. You pay SE tax on profit, not gross income.@@Carolyn-vh4nz
What about state tax?
It differs state to state so it's hard to say without diving into the details of each state.
Do they look at gross or net sales
Net (profit).
So if I only made $350 from i dependent contracting for the year can I still use deductibles?
Deductibles like business expense deductions? Absolutely. Yes.
@@OnCashFlow I meant if I made under $600 for the whole year as an independent contractor would I receive 1099? If I don’t want to do taxes do I have to if under $600?
Probably not. I think not technically required in that case.@@user-ft7lp2le6x
Can you reduce your SET with a SEP IRA?
No, only regular income tax, not SE tax. It's "above the line" on schedule 1.
@@OnCashFlow Okay. Thanks.
@@keepitreal8939 No problem!
Is the 15% a flat rate regardless of income?
15.3% of profit from Self Employment, up to a certain threshold. ($160,200 for 2023)
@@OnCashFlow Thank you for your swift response.
Social security probably wont exist anymore by the time I'm able to collect. So i just pay in when i already dont make much and I'll never see the benefit
Idk if it wont exist, but it definately will change because it's not sustainable
What if you elect to be taxed as an s-corp and take a salary? Isn't that a way to avoid self-employment tax!
Yes, that is an option to reduce SE tax, bit not eliminate. You must take a "reasonable" salary. What exactly that means depends on which accountant you ask haha.
@@OnCashFlow Do you still have to pay self-employment tax on that reasonable salary? Probably half of it as an employee and the s-corp pays for the other half? Basically you can't run away from that 15% tax. 🤦 🤣
@@williamp9158 Yes you pay SE tax on the salary:
Example: $100k business profit
$50k Salary
$50k s-corp distribution
Pay 15.3% SE tax on $50k salary
Pay fed income tax on $100k profit*
*assuming no other deductions
I'm from germany. The main reason i dont like self employemnt because of hasle that come with taxes
It might be a lot different in Germany vs the U.S. I have no idea!
15.2?
15.3% Did I accidently say 15.2? 7.65% for "employer" portion and 7.65% for "employee" portion.
odd you pay the full FICA tax but then get half back. not sure how that works.
What do you mean? You get to deduct half of it as a business expense, not that you get it back.
That plant gave me more anxiety than any Netflix finale I've seen so far
Haha! Great to know that my videos can keep you on the edge of your seat! lol
Why do you have a plant on the corner of your desk? 😅
It was just for the videos haha. I moved it after I finished filming.
What? Your title says “How to Avoid” but you only gave idea to reduce. I’ve been filling my own business taxes for years and have paid ss or Medicare . I’d already paid my 40 quarters so I don’t worry about paying more.
If you want to avoid SE tax then don't make a profit, or don't have a business at all. The same conecept applies with reducing your SE tax liability.
There's no tax bracket for self employment tax that's exactly what's wrong with it we all pay 15.3%
Yep, 15.3% of "Profit"
The whole time I am just worried that the poor plant will be knocked down D:
The plant is safe, don't worry I have moved it into a larger planter away from me haha
10:03 is the main answer
Also S-Corp Distributions in lieu of salary.
❤
:)
also there is a 2500$ base self-employment tax that you cannot escape from lol
What do you mean? I am unaware of this.
If you don't pay into social security you won't get it when you retire. So why not pay? So confusing.
Very true but there is much more to it. Social Security is unsustainable. The "benefits" are at the mercy of the government. Benefits need to be cut and/or taxes increased. Generally speaking, it is better to keep more of your money and invest it in what you want to invest it in.
wow, the subtitles are weird in this video lol
Haha they are auto generated!
How to avoid self employment tax as a Registered Nurse
Not sure about that specific occupation, but if you are working as self-employed then the same rules apply. Reduce your self-employment tax by smartly finding business tax deductions that deduct the amount of profit you receive. Education, mileage, home office, business cell phone, advertising, business travel, business meals, etc.
@@OnCashFlow I have a part time job non benefits eligible which is a W2 paid job, but also work for 3 other companies as a 1099 independent contractor?
Other videos say things like a 1099 Ind Contractor should start and LLC and transition to an S-Corp to help minimize Self Employment tax and FICA.
It’s not like I can make an LLC for myself as a Registered Nurse, nobody would hire an LLC that claims to be a Registered Nurse
@@dakdur1126 oh I see, not exactly sure how it would apply to your situation. I would definitely find someone who specializes in this to consult.
@@dakdur1126 you are still conducting business. When you register for an LLC there are options to choose from to register your self under. They must have Healthcare or similar. Look into it.
That plant is gonna get knocked over
It already has ;)
If people study how taxes work, They'd realize why they need to pay it and the benefits of paying it. I think it's all about perspective.
The problem is which taxes? How much is enough? How much is too much? Tax avoidance is completely legal and it is often written into the tax code on purpose for people to "take advantage" of. Tax avoidance tactics are sort of an incentive.
@@OnCashFlow Self employment, however most of society isn't self employed so of course they have something against it. I think taxes mostly benefit people who are wealthy or are self employed to become wealthy.
Self employment taxes and FICA taxes are the same. If you are self employed then you pay the employee portion and the employer portion. As an employee, you only see half of the self employment amount deducted from your pay, and you see the employer contribution separate. You are probably correct in your statement, but the reason is that there are incentives built into the tax code to start businesses, create jobs, and grow wealth. @@Iamwillact
Algorithm algorithm algorithm algorithm algorithm
yes, yes, yes!
Get your hands out of my pocket sleepy joe
haha
Sorry man, gave you a 👎. Your how to avoid portion of the video was like 30 seconds of "duh" and I'm betting most of us already know what you explained for the rest of the video.
I'm so sorry, this was one of my earlier videos and I have gotten a lot better at getting to the point and cutting out unnecessary information. Please give me another chance my checking out my more recent videos, I would really appreciate it.
Clickbait. No way to avoid it
Show less profit, spend more on your business. Not clickbait.
Was not for me
Hey i have a few questions, do u have another social media we could msg on?
Sorry, I don't use social media (besides YT).
Thank you!
Happy to help!
What if ur employed and self employed will it be a problem?
Can't generally avoid paying FICA with a regular W-2 job because you don't have expenses to offset income (profit).