Who doesn’t want to learn how to start avoiding self employment taxes? Anyone who’s experienced the grim reality of paying for the privilege of work at home knows that the self employment tax can be pretty steep. The more professionals make through self employment, the more they have to pay for it. It’s pretty hard to find success when it only causes an increase in taxes.
Why not start avoiding self employment taxes instead? Self employed professionals are still liable for income taxes, working expenses and even other concerns (such as health care, Web site costs, etc.). It would be much nicer to pay less for work at home.
Paying to Work at Home
The formula for figuring the self employment tax seems much more complicated than it actually is. After multiplying net self employment income by 92.35%, the remaining amount (the net earnings) is multiplied by 15.3% for Medicare and Social Security taxes. This is the cost of the self employment tax - roughly, $14 for every $100 earned, until or unless the professional earns an excess of $76,200 on the year. Any income earned in excess of this amount is not multiplied by 15.3% for Medicare/Social Security, but by 2.9% (because those who make more pay less).
But do the math and face the reality of giving the government $14 for every $100 earned, and self employment taxes can feel like a pretty tight squeeze. Factor in income taxes (which can run at right about the same amount, depending on the professional’s tax bracket), and the cost of work at home is suddenly pretty steep. Why not start avoiding self employment taxes instead?
Avoiding Self Employment Taxes
Alas, avoiding self employment taxes isn’t really possible - and more’s the pity. According to the United States government, an individual is hereby self employed if: they own/operate a trade or business as a sole proprietor or independent contractor; they are a member of a partnership of the aforementioned; or, they are otherwise in business for themselves. Make money through work at home jobs? That means self employment, too…and, self employment taxes. The government says self employed professionals must pay the tax if they earn $400 or more through their working endeavors.
Self employment taxes apply to all professionals at any age, even those who are currently receiving Medicare and Social Security benefits. Avoiding self employment taxes sounds wonderful, but it’s hardly plausible for those who earn a living by self employment and work at home. Taxes are a fact of every life, and perhaps it seems that the self employed professional pays a bit more. Lessen the blow by claiming as many expenses as possible and making quarterly or monthly tax payments, to avoid a lump sum payout once a year.
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