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GreatFX Business Cards Small Business Buzz Estimating Self-Employed Tax
Small Business BuzzEstimating Self-Employed Tax
A doubleshot of business news espresso with extra froth
Yesterday I spent a good part of the afternoon attempting to estimate my tax liability for 2005 while looking ahead to 2006.
As all small business owners know, self-employment tax is a major part of your total tax liability each year. It represents 15.3 percent of your net earnings from self-employment as reported on Schedule SE.
The tax consists of two portions:
12.4% for Social Security – $11,160.00 maximum (2005).
Net Income * .9235 = Net Earnings
SStax + MCtax = SE Tax
Assume your company earned $55,000 net income. Your estimated self-employment tax is figured as:
55,000 * .9235 = $50,792.50
SE Tax = $7,771.25
Good news: you can take one half of your self-employment tax amount as a deduction against total income on your Form 1040.
Disclaimer: Tax results submitted to the IRS should be figured by a qualified accounting professional.
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By Chris Brunner
Saturday, August 25th, 2012 @ 7:01 PM CDT
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