Why I HATE the self-employment tax
When they tried to make PayPal and other payment services report anything over $600, I believe they are trying to find a way to make us pay self-employment taxes on that money too.
I hate taxes, period. I am on the single rate and they kill me. So, I feel you!
Shopping Arkansas, Louisiana, & Mississippi.
It's not fun looking at my husband's w-2 either... over 15k withheld in federal (not including social security or Medicare) and we will still owe....
Taxes are what we happily pay to live in a civilizsd society. In the case of SE Tax, it funds Social Security payments (which most of us will one day receive.)
Edited 1 time(s). Last edit at 03/20/2023 01:54AM by Rousseau.
Edited 1 time(s). Last edit at 03/20/2023 01:54AM by Rousseau.
Since 1968 (when I paid $50 in SS taxes), I have contributed a total of $169,370 in SS taxes. I started collecting in May 2021. By the end of 2023, I will have collected $102,317 and by the middle of 2024, I will have received more in payments than my total contributions. It will take the remainder of 2024 plus 2025 and 2026 to collect more than the employer's contribution. At that point, I will be 74 with a life expectancy of 12 years. I will have collected many times the money paid into SS by me and various employers.
Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008
@myst4au wrote:
Since 1968 (when I paid $50 in SS taxes), I have contributed a total of $169,370 in SS taxes. I started collecting in May 2021. By the end of 2023, I will have collected $102,317 and by the middle of 2024, I will have received more in payments than my total contributions. It will take the remainder of 2024 plus 2025 and 2026 to collect more than the employer's contribution. At that point, I will be 74 with a life expectancy of 12 years. I will have collected many times the money paid into SS by me and various employers.
Did you take into account inflation?
@Rousseau wrote:
Taxes are what we happily pay to live in a civilizsd society. In the case of SE Tax, it funds Social Security payments (which most of us sill one day receive.)
I don't happily pay taxes when I see government waste.
It is possible to make the calculation very complicated. I could also have tried to calculate NPV for every year I contributed money. The SS payments have also reflected inflationary increases since 1975. So for practically purposes, during all of my working life (I paid SS taxes as a student between 1968 (high school) and 1978 (grad school) inflation adjustments were made for payments in both directions. I choose to consider it a wash.
@johnb974 wrote:
@myst4au wrote:
Since 1968 (when I paid $50 in SS taxes), I have contributed a total of $169,370 in SS taxes. I started collecting in May 2021. By the end of 2023, I will have collected $102,317 and by the middle of 2024, I will have received more in payments than my total contributions. It will take the remainder of 2024 plus 2025 and 2026 to collect more than the employer's contribution. At that point, I will be 74 with a life expectancy of 12 years. I will have collected many times the money paid into SS by me and various employers.
Did you take into account inflation?
Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008
@johnb974 wrote:
When they tried to make PayPal and other payment services report anything over $600, I believe they are trying to find a way to make us pay self-employment taxes on that money too.
They are only trying to "make" you pay what you legitimately owe on any profit made.
I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
I've learned to never trust spell-check or my phone's auto-fill feature.
@johnb974 wrote:
When they tried to make PayPal and other payment services report anything over $600, I believe they are trying to find a way to make us pay self-employment taxes on that money too.
Who doesn't pay SE taxes on their MSC fees - regardless of whether they are reported by PayPal or not? (Hmmm... Does the IRS pay informant fees for turning in tax cheats?)
@Rousseau wrote:
@johnb974 wrote:
When they tried to make PayPal and other payment services report anything over $600, I believe they are trying to find a way to make us pay self-employment taxes on that money too.
Who doesn't pay SE taxes on their MSC fees - regardless of whether they are reported by PayPal or not? (Hmmm... Does the IRS pay informant fees for turning in tax cheats?)
They should publish the names of the informants.
You are responsible for taxes (income and SS) on all income you receive even if the MSC didn't send you a 1099 form because you stayed below the current $600 threshold.
@johnb974 wrote:
When they tried to make PayPal and other payment services report anything over $600, I believe they are trying to find a way to make us pay self-employment taxes on that money too.
Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008
@myst4au wrote:
Since 1968 (when I paid $50 in SS taxes), I have contributed a total of $169,370 in SS taxes. I started collecting in May 2021. By the end of 2023, I will have collected $102,317 and by the middle of 2024, I will have received more in payments than my total contributions. It will take the remainder of 2024 plus 2025 and 2026 to collect more than the employer's contribution. At that point, I will be 74 with a life expectancy of 12 years. I will have collected many times the money paid into SS by me and various employers.
$3,300 a month? That seems high. I'm still a bit further out so I'm not that proficient in all of it. I remember reading something like $1500 was the average SS check. (A quick google search provided the info in case anyone else was interested $2484 was the average in 2022 for people who started collecting at age 65.)
Don't forget about compounding. In 55 years, that $50 at 7% interest would be worth $2065 today.
Edited 2 time(s). Last edit at 03/20/2023 01:25PM by olympia tennenbaum.
Does everyone claim a home office? I'd think that could also help defray the taxes. I'm still looking into it and learning about it. My only concern is how it affects that sale of your home later.
@olympia tennenbaum wrote:
Does everyone claim a home office? I'd think that could also help defray the taxes. I'm still looking into it and learning about it. My only concern is how it affects that sale of your home later.
I don't claim a home office, but will look into it next year. I've read it raises red flags with the IRS. I wish they would raise the amount to file Self-employment taxes from $600 to $6000. The $600 amount hurts the poor and middle class.
Yes, they do. 10% of any tax and penalties collected from the miscreant.
@Rousseau wrote:
@johnb974 wrote:
When they tried to make PayPal and other payment services report anything over $600, I believe they are trying to find a way to make us pay self-employment taxes on that money too.
Who doesn't pay SE taxes on their MSC fees - regardless of whether they are reported by PayPal or not? (Hmmm... Does the IRS pay informant fees for turning in tax cheats?)
John, if $7,000 is taxable, you're $6,000 better off than if you hadn't shopped.
What's the problem?
Kinda reminds me of my friend who hit a casino jackpot for $36,000 and griped because she had to pay taxes on it. I told her to give me the $36,000 and I would HAPPILY pay the tax on it.
What's the problem?
Kinda reminds me of my friend who hit a casino jackpot for $36,000 and griped because she had to pay taxes on it. I told her to give me the $36,000 and I would HAPPILY pay the tax on it.
Yes, it affects your basis, and the write-offs you have taken CAN affect taxes. If you own your home, one of the allowed deductions is depreciation on that portion of the home used as an office; this depreciation generates a taxable recapture upon sale.
Could be significant, may not be. Absolutely has to be figured on a case-by-case basis.
From personal experience, the paperwork generated to complete taxes at that time requires a professional. And even some "professionals" aren't up to it!
Could be significant, may not be. Absolutely has to be figured on a case-by-case basis.
From personal experience, the paperwork generated to complete taxes at that time requires a professional. And even some "professionals" aren't up to it!
@olympia tennenbaum wrote:
Does everyone claim a home office? I'd think that could also help defray the taxes. I'm still looking into it and learning about it. My only concern is how it affects that sale of your home later.
@johnb974 wrote:
I wish they would raise the amount to file Self-employment taxes from $600 to $6000. The $600 amount hurts the poor and middle class.
I know I've stated this to you before, but that threshold of $600 is for administrative purposes only. It is only relevant to the entity that issues the 1099. It just means that they have to track what they've paid out and report anything over that amount.
Receiving a 1099 has absolutely NOTHING to do with whether or not you are obligated to report that income - because it is your responsibility to report ALL income, whether you've received a 1099 or not. You should be keeping track and reporting every dollar. This has always been the case.
The question of whether the income you report is taxable, or how much of it is taxable, will be different for everyone because your tax liability will be based on what tax bracket you fall under, your deductions, etc.
.
Edited 1 time(s). Last edit at 03/20/2023 04:57PM by shopnyc.
@olympia tennenbaum wrote:
Does everyone claim a home office? I'd think that could also help defray the taxes. I'm still looking into it and learning about it. My only concern is how it affects that sale of your home later.
I've claimed a home office for around 30 years. During that time, I've bought and sold several homes, and the tax impact when selling has been insignificant. In my experience, claiming it has been of far more benefit than not doing so would have been. Unless you make a ton of profit when you sell, any gains tax is probably not going to outweigh the benefit accumulated over the years.
You can also, if you show a profit after all legitimate business deductions, claim the percentage of your utility bills that is equal to the percentage of your home you claim as your office as a tax deduction. So if you claim 20% of your home as your office (it can only be for your office, not for any other purpose), you can claim 20% of your utility bills. But that's only if you show a profit in any one year. So, if you don't claim the home-office deduction, you can't claim the utilities, either.
Honestly, this is why self-employed people really should have an experienced tax preparer or accountant handle their taxes. I've been with my guy for almost 20 years, and he's paid for himself over and over.
I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
I've learned to never trust spell-check or my phone's auto-fill feature.
@ceasesmith wrote:
From personal experience, the paperwork generated to complete taxes at that time requires a professional. And even some "professionals" aren't up to it!
Exactly! I think I just cross-posted with you, Cease, saying the same thing.
I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
I've learned to never trust spell-check or my phone's auto-fill feature.
Remember, you pay taxes on your net profit, not your gross income. For self-employed folks, expenses and other deductions usually bring your taxable income way down. When self-employed people get jittery about taxes, they often forget about all the deductions they're entitled to.
I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.
I've learned to never trust spell-check or my phone's auto-fill feature.
@BirdyC wrote:
Remember, you pay taxes on your net profit, not your gross income. For self-employed folks, expenses and other deductions usually bring your taxable income way down. When self-employed people get jittery about taxes, they often forget about all the deductions they're entitled to.
Deductions that many regular employees also have but cannot deduct, such as mileage, home office, etc.
Also, when you sell your primary home, the first $250,000 in profit if you are single and $500,000 if married filing jointly are exempt from taxes, so the depreciation from claiming a home office is unlikely to have any effect at all unless you are a boomer who was able to take advantage of cheap housing way back when.
@ceasesmith wrote:
John, if $7,000 is taxable, you're $6,000 better off than if you hadn't shopped.
What's the problem?
Kinda reminds me of my friend who hit a casino jackpot for $36,000 and griped because she had to pay taxes on it. I told her to give me the $36,000 and I would HAPPILY pay the tax on it.
If the line for paying SE is $6000, I would be keeping more of my money.
@johnb974 wrote:
@ceasesmith wrote:
John, if $7,000 is taxable, you're $6,000 better off than if you hadn't shopped.
What's the problem?
Kinda reminds me of my friend who hit a casino jackpot for $36,000 and griped because she had to pay taxes on it. I told her to give me the $36,000 and I would HAPPILY pay the tax on it.
If the line for paying SE is $6000, I would be keeping more of my money.
I'm glad johnb974 isn't doing my taxes....
Duuuuuuuuuuude! You really aren't comprehending! Please have a professional prepare your taxes.
That's the reason I've never claimed full home office - I've deducted portions of various expenses like printer, ink, paper (when shopping required a lot more paper/maps, etc) but I never did the whole home office because of the future resale impact.
@olympia tennenbaum wrote:
Does everyone claim a home office? I'd think that could also help defray the taxes. I'm still looking into it and learning about it. My only concern is how it affects that sale of your home later.
@joanna81 wrote:
That's the reason I've never claimed full home office - I've deducted portions of various expenses like printer, ink, paper (when shopping required a lot more paper/maps, etc) but I never did the whole home office because of the future resale impact.
@olympia tennenbaum wrote:
Does everyone claim a home office? I'd think that could also help defray the taxes. I'm still looking into it and learning about it. My only concern is how it affects that sale of your home later.
The impact is minimal, if any...
I had a CPA look at our taxes after I did them the year we moved (sold/purchased in 2020)
We profited over 100k on the sale of our home. I've always taken a deduction for home office. There was practically no tax impact when we sold.
@luckygirl0100 wrote:
@johnb974 wrote:
@ceasesmith wrote:
John, if $7,000 is taxable, you're $6,000 better off than if you hadn't shopped.
What's the problem?
Kinda reminds me of my friend who hit a casino jackpot for $36,000 and griped because she had to pay taxes on it. I told her to give me the $36,000 and I would HAPPILY pay the tax on it.
If the line for paying SE is $6000, I would be keeping more of my money.
I'm glad johnb974 isn't doing my taxes....
Duuuuuuuuuuude! You really aren't comprehending! Please have a professional prepare your taxes.
I use Turbo Tax, next time try asking questions first.
@luckygirl0100 wrote:
@johnb974 wrote:
@ceasesmith wrote:
John, if $7,000 is taxable, you're $6,000 better off than if you hadn't shopped.
What's the problem?
Kinda reminds me of my friend who hit a casino jackpot for $36,000 and griped because she had to pay taxes on it. I told her to give me the $36,000 and I would HAPPILY pay the tax on it.
If the line for paying SE is $6000, I would be keeping more of my money.
I'm glad johnb974 isn't doing my taxes....
Duuuuuuuuuuude! You really aren't comprehending! Please have a professional prepare your taxes.
If the first $6000 is not taxable for SE, you keep more of your money. Where did you learn to do math?
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