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Taxes -- INCLUDING Self-employment tax - Tired Posted: Nov 14th, 2015 - 4:36 pm In Reply to: Clarifying - see msg
You must not only pay the 8.65% employee tax that the employer takes out of your paycheck, you MUST ALSO PAY the employer's half of the tax as well (called "self-employment tax") which amounts to something like 7%. You do get to "write off" the employer's half (that you are paying) on your 1040 and use the MAGI that results (modified adjusted gross income) to figure your taxes on. But even on the low wages we get, 15.2% (or so) of the gross is still a lot of money. If all you make is $20,000, which is about all we DO make, then you're looking at over $3,000, which must be paid in quarterly increments 4 times a year. And that's BEFORE any additional income tax that you must also pay! So if an IC gets 8 cents a line and an employee gets 8 cents a line, the IC is getting screwed. Not to mention no benefits, either. A person really shouldn't work for any less than 30% more if you're an IC but nowadays, a lot of them are getting away with paying the same amount whether you're an IC or an employee and YOU get stuck with the taxes and no benefits, and no extra money to cover same. Unless there's some compelling reason, I wouldn't do it. In the case of straight typing, it might be worth a try, but get out of there if they start paying you half for editing. We all know that it takes longer than half the time to edit reports and they basically cut our pay in half to make us pay for the technology, knowing full well we'd be getting screwed financially.
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