• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

Taxes on the side for the self-employed

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Q. If I start a sideline self-employed business, do I still have to pay personal payroll tax if I’m over the Social Security tax wage ceiling in 2012? D.D., Cedar Grove, N.J.

A. Yes. For a self-employed business, you must pay self-employment tax, which is the equivalent of the Social Security and Medicare taxes paid by employers and employees. The self-employment tax rate on self-employment income above the Social Security tax ceiling ($110,100 for 2012) is 2.9%, double the Medicare tax rate that is withheld from employee wages. Thus, you must pay the 2.9% tax on your self-employment earnings even though the wages from your regular job exceed the Social Security tax ceiling. You don’t have to pay any Social Security tax on your self-employment income.

Tip: Half of the self-employment tax you pay is deductible “above the line” on your Form 1040.

Like what you've read? ...Republish it and share great business tips!

Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...

We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.

The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.

" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/32305/taxes-on-the-side-for-the-self-employed "

Leave a Comment