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Author Topic: Social security for the self employed . . .  (Read 3801 times)

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Branlin

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Social security for the self employed . . .
« on: February 16, 2011, 09:37:55 PM »

Correct me if I'm wrong, but did I hear Ian say tonight that if you own a business you don't have to pay SS tax?

I've been self-employed for 26 years, and have paid "Self-employment tax" (SS and MediCare, see here) every year, amounting to over 15%.

I've had 4 different accountants over the years, and none of them ever said: "You, know, this tax is voluntary. Do you still want to pay it?"

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Cognitive Dissident

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Re: Social security for the self employed . . .
« Reply #1 on: February 18, 2011, 02:21:48 PM »

Of course they haven't.  They don't want to be harassed by the state on other quibbles.
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Branlin

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Re: Social security for the self employed . . .
« Reply #2 on: February 18, 2011, 08:28:31 PM »

Of course they haven't.  They don't want to be harassed by the state on other quibbles.

 
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uk1337

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Re: Social security for the self employed . . .
« Reply #3 on: February 18, 2011, 11:05:49 PM »

I've had 4 different accountants over the years, and none of them ever said: "You, know, this tax is voluntary. Do you still want to pay it?"

Might be worth checking an accountant is on your side (as his/her employer) rather than a simple hack. Those exams aren't hard so a lot of journeymen get through.

At least it's 7.5+7.5 there, in the UK it's 11+11. All the more reason not to pay it :)
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Branlin

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Re: Social security for the self employed . . .
« Reply #4 on: February 19, 2011, 09:15:16 AM »

This is all pretty silly.

I should have used smileys or something, but when I said: "I've had 4 different accountants over the years, and none of them ever said: 'You, know, this tax is voluntary. Do you still want to pay it?'" -- it was tongue-in-cheek.

Of course, all taxes are voluntary. You don't have to pay any of them, ever. But when they catch up with you they will seize whatever assets you have to cover those unpaid taxes, along with interest and penalties. And if you have no assets they will throw you in jail.

The link I provided in my first post explains it, right from the IRS site itself:

Who Must Pay Self-Employment Tax?

You must pay self-employment tax and file Schedule SE (Form 1040) if either of the following applies.

    * Your net earnings from self-employment (excluding church employee income) were $400 or more.
    * You had church employee income of $108.28 or more.

Generally, your net earnings from self-employment are subject to self-employment tax.  If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ to figure net earnings from self-employment.

If you have earnings subject to self-employment tax, use Schedule SE to figure your net earnings from self-employment.  Before you figure your net earnings, you generally need to figure your total earnings subject to self-employment tax.

Note:  The self-employment tax rules apply no matter how old you are and even if you are already receiving Social Security or Medicare.


The word "generally", I suppose is the escape clause? Haha, good luck -- it's just another myth perpetuated by the internet. It really only covers some government workers. Does anyone seriously think these tyrants don't know what they're doing when it comes to confiscating money? Along with coercion, trespassing, destroying others' property, and murder, they are the only things they really do efficiently.

From the SS website itself:

CORRECTING THE MYTHS AND MISSTATEMENTS

Myth 1: President Roosevelt promised that participation in the program would be completely voluntary

Persons working in employment covered by Social Security are subject to the FICA payroll tax. Like all taxes, this has never been voluntary. From the first days of the program to the present, anyone working on a job covered by Social Security has been obligated to pay their payroll taxes.

In the early years of the program, however, only about half the jobs in the economy were covered by Social Security. Thus one could work in non-covered employment and not have to pay FICA taxes (and of course, one would not be eligible to collect a future Social Security benefit). In that indirect sense, participation in Social Security was voluntary. However, if a job was covered, or became covered by subsequent law, then if a person worked at that job, participation in Social Security was mandatory.

There have only been a handful of exceptions to this rule, generally involving persons working for state/local governments. Under certain conditions, employees of state/local governments have been able to voluntarily choose to have their employment covered or not covered.


And beyond all of this, whatever is written in law doesn't mean crap anyway. They do whatever they want.


« Last Edit: February 19, 2011, 09:19:55 AM by Branlin »
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atomiccat

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Re: Social security for the self employed . . .
« Reply #5 on: February 22, 2011, 03:23:16 AM »

the word employee in certain legal terms is someone whom works inside D.C.,

but the government doesn't care so just continue to keep paying if you don't want them on your ass

Turd Ferguson

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Re: Social security for the self employed . . .
« Reply #6 on: February 22, 2011, 09:14:14 AM »

I haven't paid into SS for 21 yrs, since I've been working for myself. All I ever get from the SS administration is a form every year, showing what I've paid in up to this point, stating that based on my  current payment into the system, at my current rate, I wont be eligible for benefits. Nothing stating that I need to start paying in. Same exact form every year for 21 yrs.


I gotta go with Ian on this one, technically.
« Last Edit: February 22, 2011, 09:16:56 AM by quickmike »
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Bobnoxus

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Re: Social security for the self employed . . .
« Reply #7 on: March 02, 2011, 02:23:16 PM »

Bobnoxus does not give legal or tax advice.

You need an accountant who is going to help you reduce your taxes. For one, make sure you're deducting everything you can. There's a lot of gray area here, so some accountants will be conservative, and some will be aggressive. Then, you have this profit. If you pay it to yourself as a salary, you owe SS. If it's a distribution of company profits, it's not salary and is not subject to SS.

So what are the rules for salary and profit? In my business, income changes wildly from month to month, so a salary is hard to predict. Hence, I pay no salary during the year, and do a determination at the end of the year. If I have good profits, there are some limits as to what can be a distribution, and what can be salary. It's all very wishy washy. The IRS will tell you one thing, an aggressive accountant will tell you another, and when all is said and done, it comes down to how hard is the IRS willing to work to argue the gray area.

On that last point, make sure you have an accountant who knows how to argue against the IRS, make their life miserable, and basically get them to leave you alone. You'll pay for that service too, plus some "missing tax" that will basically be a negotiated settlement, but it's cheaper than the tax bill. You don't want an accountant who won't fight for you when the audit comes.
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