3 ms·
If the guy has $45k in business income, then he owes $6885 of payroll taxes (unless he is Amish). I don't care what tool you use, that number is the absolute f
by jcampbell1 15y ago
If the guy has $45k in business income, then he owes $6885 of payroll taxes (unless he is Amish). I don't care what tool you use, that number is the absolute floor for what he would have to pay out of pocket.
- dangrossman 15y agoSorry, but you don't know what you're talking about. Pull out your 2011 form 1040: http://www.irs.gov/pub/irs-pdf/f1040.pdf http://www.irs.gov/pub/irs-pdf/f1040.pdf * 56: Self-employment tax. Attach Schedule SE. * 61: Add lines 55 through 60. This is your total tax. * 62-72: Credits and payments, including the Earned Income Credit. * 76: AMOUNT YOU OWE: Subtract line 72 (total credits) from line 61 (total tax). That's where his $6.3k SE bill gets nearly wiped out by $5.5k in earned income credit. Credits, unlike deductions, are subtracted dollar for dollar from total tax owed. If he files jointly with a spouse, it can actually reduce their tax bill to $0 on that income. There's no category of taxes that can't be reduced by EIC, including SE (payroll) tax.
- jcampbell1 15y agoBut he gets those credits whether or not he reports his profit. On a cashflow basis, it will cost him 20%. You are right though, his tax bill at the end of the year would be about 8% of $45k.
- ars 15y agoThat's not true - the EIC goes up when you make more (up till a limit).