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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Iam self-empoyed, i own and aucition house. In November 2008

Customer Question

I'am self-empoyed, i own and aucition house. In November 2008 i was able to afford a salery for myself, I contacted my local withholding office and they told me that i was able to withhold even though i was self-employed to follow the guidelines. So i did so, now im getting ready to fle my 2008 income taxes and it says that i have to pay a Self-employment tax, but i have already withheld from my wages. I did this so i would have a record of expenses, and of my income. What do i do now?
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
HelloCustomer

When you are self-employed, then even if you pay yourself a salary, you are still considered self-employed and you are responsible for the full share of self employment taxes (social security and medicare). Those two taxes combined currently total 15.3%.

When you are an employee of another firm, half of those taxes are deducted from your paycheck and the other half is matched and paid by your employer. When you are self-employed, you are then considered to be both the employer and the employee, and therefore you are responsible for both shares of the tax. Paying yourself a salary does not relieve you of this requirement. You are still responsible for social security and medciare taxes on your net income from self employment, including any salary you may pay yourself during the year, as your salary is part of your net profits from your business.

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