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How to Calculate
Self-EmploymentTaxes
Pay, $92,350
Your Share of
Payroll Taxes,
$7,650
(Before other taxes are
withheld)
If you earned $100,000 as an
employee, ...
(Before other taxes are
withheld)
Your Employer is also paying
the same amount in payroll
taxes on your behalf, 7.65%
of y...
(Before other taxes are
withheld)
Adding the “employer’s share”
slice grew the overall money pie
from $100,000 to $107,650...
The IRS allows you to subtract
7.65% of your self-employment
income before you calculate
the self-employment tax. In
our $...
Paying 14.130% in Self-
Employment taxes isn’t fun, but
it’s better than paying 15.3%.
In this example it’s $1,170 better!...
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Self-Employment Taxes Explained

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Self-employment taxes are tricky, but this short slide show will help you understand the basics of how to calculate your social security and medicare taxes. You can't just double an employee's rateor you'll be paying too much!

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Self-Employment Taxes Explained

  1. 1. How to Calculate Self-EmploymentTaxes
  2. 2. Pay, $92,350 Your Share of Payroll Taxes, $7,650 (Before other taxes are withheld) If you earned $100,000 as an employee, then you would expect $7,650 (7.65%) to be withheld from your pay for payroll taxes. Employee
  3. 3. (Before other taxes are withheld) Your Employer is also paying the same amount in payroll taxes on your behalf, 7.65% of your income. However… When you’re SELF-employed you have to pay both the employer and employee portions of the payroll tax. But the formula is NOT just a straight double of your payroll tax rate from 7.65% to to 15.3% Employee Pay, $92,350 Your Share of Payroll Taxes, $7,650 Employer's Share of Payroll Taxes, $7,650
  4. 4. (Before other taxes are withheld) Adding the “employer’s share” slice grew the overall money pie from $100,000 to $107,650. If your self-employment income is $100,000 you don’t pay the same amount of payroll tax out of your $100,000 that an employee/employer combination is paying out of $107,650 ..and you shouldn’t! Self-Employed Pay, $92,350 Your Share of Payroll Taxes, $7,650 Employer's Share of Payroll Taxes, $7,650 Why the math gets tricky: (Before other taxes are withheld)
  5. 5. The IRS allows you to subtract 7.65% of your self-employment income before you calculate the self-employment tax. In our $100,000 example it looks like this: 15.3% X (1-0.0765) X $100,000 = 15.3% X 0.9235 X $100,000 = $14,130 (or 14.130%) Self-Employed The IRS Solution! Pay, $92,350 Your Share of Payroll Taxes, $7,650 Employer's Share of Payroll Taxes, $7,650 (Before other taxes are withheld)
  6. 6. Paying 14.130% in Self- Employment taxes isn’t fun, but it’s better than paying 15.3%. In this example it’s $1,170 better! And now you know why the IRS has that goofy adjustment formula when figuring your self-employment tax If you have questions contact me at http://pimtax.com/contact-form

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