5 Self-Employment Tax Mistakes You Want to Avoid
If you own a business that isn't incorporated, your business income likely triggers self-employment (SE) tax to cover Social Security and Medicare taxes. Self-employment tax is imposed on net earnings from self-employment, which is income derived from carrying on a trade or business, minus allowable deductions. A self-employed person pays what amounts to the employee and employer share of FICA. The SE rate is considerable - 15.3%.
Misclassifying gig income
Thinking all income for limited partners and LLC members are exempt
Not taking SE tax into account for retirement plans
What to do: Don't ignore SE tax in figuring retirement plan contributions or face penalties for making excess contributions.
Not using the optional SE tax in bad years
What to do: Don't pass up the opportunity to build Social Security credits, which can impact retirement benefits later on.
Failing to include SE tax in estimated taxes
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client.
For further information please contact me at www.kmckernanlaw.com kevin@kmckernan.com or 718-317-5007.