Q&A: Any way to reduce my Self-employment tax that I pay without decreasing my Income?
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Question: Any way to reduce my Self-employment tax that I pay without decreasing my Income?
I know that the Self employment tax is 15.3 percent.I make ,000 a year, and I’m self employed. I also get a 1099 that states my Income. I did one of those Turbo tax on line calculators and I had more deductions then income. So I didn’t owe anything on Income, but It said that I owed about 10,000 in self employment tax. Is there any way to not have to pay it or simply reduce it? Thanks.
The following is the answer:
Answer by Bibs
When you retire some day, you will be glad that you have all those accumulated benefits. Do not fudge on this one. It is like shooting yourself in the foot.
Answer by tkahrs12122
That 15.3 is for social security and must be paid. There is no option.
Answer by Jason
Realistically speaking you will have wanted to pay the 15.3% of SE Tax, which is both Social Security and Medicare Taxes for you for the year. Your other option would be to put your income into a Tax Deferred retirement plan, like a Solo 401(k), a SEP, or a Traditional IRA. A financial adviser can help with this.
If you don’t want to reduce your income, the best option would be to make quarterly estimates to the IRS to reduce your liability at the end of the year. Failing to do that would also incur penalties to your balance due.
Answer by travelguruette
If you dont have any income you dont have income tax. You still have to pay ss and medicare
Answer by wartz
There is no options here. If you were a wage earner the same amount of tax would be due but it would be paid by withholding and the employer’s share.
Answer by xtraheavy01
That makes no sense. If you prepared your Schedule C from the 1099 you received and you took deductions and you had more deductions then income., then you should wind up with a negative or loss on your Schedule C. There would be no self employment tax owed.
Unless what you are saying is that you have itemized deductions and you ended up with a net income from your Schedule C. then that would make sense.
Then the only way to reduce your SE tax is to reduce your net schedule C , in effect, claim more deductions to offset the Schedule C income.
If you have W-2 wages, make sure you take credit for the fica and medicare.
Answer by ninasgramma
You must have expenses against your self-employment income. Expenses would include any of those listed on Schedule C.
Contributing to your own 401k, or other retirement plan will reduce your income taxes, it will not reduce your self-employment tax. However, if you have an employee, your payments toward the employee’s retirement plan is a deduction against your self-employment income. However, you will pay the employee’s half of SS and Medicare.
Contributions to your health insurance, or to your employee’s health insurance, are treated similarly to retirement contributions.
Depending on the nature of your business, you could look into forming an S Corporation. If it is appropriate to treat some of your payments as dividends from the S Corporation, you may escape some self-employment taxes, and pay self-employment taxes only on the payments you receive for services rendered.
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