Self Employment Tax

danielbbrooks

I'm receiving my income under business income. The self employment tax being held in adjustments is less than half of the 15.3 percent I presumably owe. My question is twofold. Why is the amount being reserved less than half and what is the proper procedure when I go to pay the whole amount owed on the quarterly payments? Any help would be greatly appreciated. I was using QBSE which is much less complicated but the file crashed crashed so I'm trying this.

NotACPA

WHO is withholding that SE Tax?  Re: the amount of the W/H you'll need to discuss with them.

Your side of the W/H tax can either be transferred to a special account for this purpose that you set up ... OR, you can just pay it when owed from your regular banking account.

In either case, it's the payment to the IRS that's the expense ... NOT the Withholding.

danielbbrooks

As was explained to me by another in this community, when you receive income under Business income half of the self employment (actually a little less) tax shows up automatically in adjustments to income in the tax planner.

Frankx

First, I must caution you that I am not providing tax advice, and suggest that you should consult a professional about these matters (which can be complex). 

That being said I would question whether you are being treated as self-employed (which you indicate) or as an employee, since employers withhold FICA/Medicare taxes from employees and the amount is approximately one-half of the combined rate of 15.3% (which you note above).  There should be no FICA/Medicare withholding by the payor if you are a contractor, so I would double check with the payor about your status.

In general, self-employed persons remit estimated tax payments to federal and state tax departments on a quarterly basis (on 4/15; 6/15; 9/15 and 1/15) and the tax payments include both estimated income taxes and estimated FICA/Medicare taxes for the prior calendar quarter.

Hope this helps.

danielbbrooks

Thanks, I am self employed. I get a 1099. I was using QBSE which just told me how much to send. This is reserving a little less than half. I guess I'll find out when I go to make my payment.

Frankx

Understood, but I suggest you check with the payor to make sure they are remitting the withheld amounts to the IRS before you calculate your first quarterly payment.  According to IRS regulations, federal taxes are required to be withheld by a non-employer payor from a contractor ONLY if the contractor failed to provide a taxpayer Identification number (SS number) and these are called "backup withholding" taxes.
Good luck!

danielbbrooks

Thanks, They have my SS and forms were filled out years ago. They don't with hold. It's just that i'm using this new software.

volvogirl

Quicken does not calculate the SE tax.  And it is on the Net Profit (income minus expenses).  You have to send it in to the IRS yourself each quarter.  Quicken is very different than QuickBooks.  I imagine the tax planner is for your regular income tax.  You get to subtract 1/2 the SE tax as an adjustment to your AGI to calculate the regular income tax on your income.  

danielbbrooks

Yes it does. It actually says 1/2 of self employment taxes due. I learned how to do this from this community.