Indies Pay Less SE Tax In 2011

Hi June,

Wondering if the Payroll Tax Cut will affect Indies, too--i.e. will our Self-employment taxes go down for 2011? I think your readers would like to know!

Thanks,
Jolene


Hi Jolene,

"Enjoyed" my morning coffee reading the regs on the new tax act. We in the tax business know it as "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, H.R. 4853." I would much rather have been reading Harpers or The New Yorker. Or even The Economist.

Anyway, to your question:

For 2011 only the social security rate is reduced by 2% for employees and for the self-employed.

For example, if you are self-employed with net income subject to SE tax, instead of paying $1,530 SE tax, you will pay $1,330.

If you have employees, you must reduce the Social Security withholding from his or her paycheck by 2%. So instead of withholding 6.2% you are to withhold 4.2%,

That means if you pay someone $100 and for Social Security and Medicare Tax you were withholding $7.65 [the employees 1/2] you will now withhold $5.65. The employer's share is still $7.65. The total = $13.30.

Time for more coffee!
June