If you have the maximum social security withheld from W-2 wages at one job, but you also have a side business with a Schedule C, do you have to pay SE taxes on the business income also? Thanks.
2007-10-11 04:11:10 · 7 answers · asked by swalsh7786 1 in Business & Finance ➔ Taxes ➔ United States
Taxes for Social Security apply to the first $97,500 of your income. For your W-2 wages at your job, the percentage for Social Security is 6.2%. If your W-2 wages don't exceed $97,500, then you need to pay SE taxes for Social Security on the amount of business income that is equal to $97,500 minus your W-2 wages. Taxes for Medicare apply to all of your income and therefore you will need to pay 2.9% of all of your self-employment income.
Example: If you earn $60,000 per year in W-2 wages and then earn $50,000 per year in self-employment income, you would need to pay Social Security taxes (12.4%) on $37,500 of your self-employment income. ($97,500 limit - $60,000 W-2 wages) You need to pay Medicare taxes (2.9%) on your entire self-employment income. In this example you need to pay (12.4% * $37,500) + (2.9% * $50,000) = $6,100 in SE taxes. This is only a rough estimate and doesn't exactly follow the rules in Schedule SE of Form 1040. You will need to complete Schedule SE to determine the correct amount of net income and the correct amount SE taxes you will need to pay.
2007-10-11 04:34:05 · answer #1 · answered by NGC6205 7 · 1⤊ 0⤋
No, not SS, but Medicare.
If you have the maximum Social Security withheld from your W-2 wages (which means that your wages exceed $97,500), then you will pay no additional Social Security on you Schedule C.
This computation appears on Schedule SE, line 5:
http://www.irs.gov/pub/irs-pdf/f1040sse.pdf
However, you will pay 2.9% of your net self-employment income for Medicare taxes on your Schedule C, as there is no income limit for this tax.
2007-10-11 08:23:14 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
The Social Security tax is at 6.2% of the first $97,500 in wages. The Medicare tax is 1.45% of all wages. That's the rate for W-2 employees.
For self-employment income you pay double those rates on 92.35% of the net profit from the business income. If your W-2 job has maxed out the Social Security tax, your self-employment tax will be limited to 2.9% since you will only pay the Medicare portion on those earnings.
2007-10-11 04:34:03 · answer #3 · answered by Bostonian In MO 7 · 2⤊ 0⤋
Too complicated. If the guy is self-employed, then he information a tax return and comments income on time table C. Then, will pay taxes like each physique else. yet, you suggested the guy became a "own helper" in a house. If the guy had one organization, then the guy he worked for could be paying a million/2 of the taxes and issuing a W-2.
2016-10-22 00:57:24 · answer #4 · answered by ? 4 · 0⤊ 0⤋
Social Security is taxable at 7.65 % up to $97,500 in salary. If your income from both jobs exceeds this amount, you stop taxing yourself after you've made the $97,500. (Tax year 2007)
2007-10-11 04:19:52 · answer #5 · answered by mochachreme 3 · 0⤊ 1⤋
You pay 7.65% of all income up to 94,200 for 2006. For 2007, the limit goes up to 97,500. You will not see it, but your employer will match this 7.65%. Thus a total of 15.3% is paid.
If you are self employed, you have to pay both sides of this tax, hence 15.3% self employment tax.
2007-10-11 04:23:08 · answer #6 · answered by nystom 2 · 0⤊ 2⤋
Probably, they will take as much as they can.
2007-10-11 04:16:44 · answer #7 · answered by Beth T 5 · 0⤊ 1⤋