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Ask R. Greg Paszkiewicz Your Own Question
R. Greg Paszkiewicz
R. Greg Paszkiewicz, Enrolled Agent
Category: Tax
Satisfied Customers: 357
Experience:  9 years preparing tax returns - Marietta, GA
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Self Employment Taxes

Customer Question

I am a self-employed medical transcriber who works out of one room in my house (which I own). I have no dependents. My total taxes (state and federal) always are about 25% of my gross earnings for the year. I had my taxes done by H&R Block last year, and it still was almost 25%. Do most self-employed people have to pay about 25% of gross earnings in total taxes? I earned about $49,000 last year and paid about $12,000 total taxes for the year. Am I missing some deductions? Could H&R Block have missed some? I know about deducting half of the self-employement tax and full health insurance, as well as office space deductions, but it still comes out the same.   How do self-employed people stay in business in this country with such outrageous taxes? It’s very disheartening. I need to work at home for health reasons, and my two clients will not put me on their payroll. Is there anything in the works in Congress to give us little business guys a break re: taxes?

To summarize, do most self-employed people pay a total of almost 25% of gross earnings in taxes yearly, and if not, what deductions am I missing?

Thanks very much for any advice.

Diane
Submitted: 11 years ago.
Category: Tax
Expert:  R. Greg Paszkiewicz replied 11 years ago.
Many self-employed people pay that much in taxes because of the 15.3% self employment tax charged on net schedule C income, this is the equivalent of both sides of FICA paid by W-2 employees (1/2 by employee, 1/2 by employer). What makes your taxes look so high is that you see the gross amount of your wages before employment tax deductions. Most people with W-2s never see this money and so they don't feel they are being taxed. Your 49K is equivalent to someone making under 40k on a W-2. It sounds as if you have considered many of the large deduction possibilities but having seen many H&R Block returns involving self-employed people I would be stunned if they are catching all of your expenses, they rarely do a good job with more involved returns. I strongly suggest you get a CPA or EA to do your return.

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