3 facts about your self-employment tax bill. . -- Kiritsis Law Firm Group 212 922 0005

Apr 27, 2021

There are many myths about self-employment taxes. Below is a look at some of the tax realities.

1. More than half your payment does not go to pay for future retirement benefits. If you pay yourself as an employee for rendering services to your businesses, as an employee, it is likely you are not going to get any retirement benefits for the self-employment tax portion (although, your business can take a deduction, which could alleviate some of your overall tax burden). Also, a portion of your payroll tax may go to things, which can be traced to your federal income tax withholdings, or the preverbal Medicare taxes.

2. Complex issues regarding family operated businesses. If your family is employed by your small businesses, an intricate web of federal tax, state/local tax, as well as, labor laws, could impact whether your family can work for the business, how much they can work, how much they should get paid, how much they should be taxed, and how everything fits into the overall tax situation.

3. Many ways to help you avoid self-employment taxes.  There are many ways to help minimize your self-employment taxes, such as side business contracts to reduce and/or shift your business' taxable income, and structuring your business so you receive capital type of income distribution (generally, resulting in significantly fewer taxes) through setting up an LLC, or even better, an S Corp.

 

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