15% tax on $7.5k earnings. Is that right?
This year is my first year in the USA. My sole earnings were an honorarium from a university for $7,500 -- reported on a 1099-MISC form in box 7.
For this, I was on-site for a few days and talked about my particular technical expertise with university staff, and joined them in a publication.
However, as I have just been unpleasantly informed by turbotax, this does not make me a poor person earning under the $12k deductible. This makes me a self-employed business and thus I have to pay about 15% taxes on these earnings.
This seems completely crazy. Have I missed something?
united-states taxes self-employment
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
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A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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This year is my first year in the USA. My sole earnings were an honorarium from a university for $7,500 -- reported on a 1099-MISC form in box 7.
For this, I was on-site for a few days and talked about my particular technical expertise with university staff, and joined them in a publication.
However, as I have just been unpleasantly informed by turbotax, this does not make me a poor person earning under the $12k deductible. This makes me a self-employed business and thus I have to pay about 15% taxes on these earnings.
This seems completely crazy. Have I missed something?
united-states taxes self-employment
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
New contributor
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
8
As your user name says "A Foreign Scientist", check your visa against this list. There is a paragraph that develops this statement "A NONRESIDENT ALIEN is not liable for the self-employment tax." irs.gov/individuals/international-taxpayers/…
– user662852
Mar 21 at 16:13
1
Thanks -- I have an I-765 EAD and therefore I am a resident alien.
– A-Foreign-Scientist-2018
Mar 21 at 16:38
14
You will need to verify whether you are a non-resident for tax purposes - this is different from immigration definition. If you are a NR for tax, you cannot use Turbotax, as it does not offer support for this - find software that support form 1040NR (non resident).
– Najel
Mar 21 at 16:59
1
@Davislor - the urban legend is about income tax, not just any random duty on a gallon of gas.
– Davor
Mar 21 at 22:43
@Davor Seems my comment was removed. I’ll respect that. I note that nobody who repeats that talking-point ever puts it in context. Bailey: “That’s technically true only of one kind of tax, only because most of the money most taxpayers send to the IRS every year technically counts as another kind of tax. Also, 47% was only true at the bottom of the worst recession in seventy years.” Motte: “Half of Americans pay no taxes!”
– Davislor
2 days ago
|
show 2 more comments
This year is my first year in the USA. My sole earnings were an honorarium from a university for $7,500 -- reported on a 1099-MISC form in box 7.
For this, I was on-site for a few days and talked about my particular technical expertise with university staff, and joined them in a publication.
However, as I have just been unpleasantly informed by turbotax, this does not make me a poor person earning under the $12k deductible. This makes me a self-employed business and thus I have to pay about 15% taxes on these earnings.
This seems completely crazy. Have I missed something?
united-states taxes self-employment
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
New contributor
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
This year is my first year in the USA. My sole earnings were an honorarium from a university for $7,500 -- reported on a 1099-MISC form in box 7.
For this, I was on-site for a few days and talked about my particular technical expertise with university staff, and joined them in a publication.
However, as I have just been unpleasantly informed by turbotax, this does not make me a poor person earning under the $12k deductible. This makes me a self-employed business and thus I have to pay about 15% taxes on these earnings.
This seems completely crazy. Have I missed something?
united-states taxes self-employment
united-states taxes self-employment
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
New contributor
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
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A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
edited Mar 21 at 17:57
A-Foreign-Scientist-2018
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
New contributor
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
asked Mar 21 at 15:21
A-Foreign-Scientist-2018A-Foreign-Scientist-2018
10114
10114
New contributor
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
A-Foreign-Scientist-2018 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
8
As your user name says "A Foreign Scientist", check your visa against this list. There is a paragraph that develops this statement "A NONRESIDENT ALIEN is not liable for the self-employment tax." irs.gov/individuals/international-taxpayers/…
– user662852
Mar 21 at 16:13
1
Thanks -- I have an I-765 EAD and therefore I am a resident alien.
– A-Foreign-Scientist-2018
Mar 21 at 16:38
14
You will need to verify whether you are a non-resident for tax purposes - this is different from immigration definition. If you are a NR for tax, you cannot use Turbotax, as it does not offer support for this - find software that support form 1040NR (non resident).
– Najel
Mar 21 at 16:59
1
@Davislor - the urban legend is about income tax, not just any random duty on a gallon of gas.
– Davor
Mar 21 at 22:43
@Davor Seems my comment was removed. I’ll respect that. I note that nobody who repeats that talking-point ever puts it in context. Bailey: “That’s technically true only of one kind of tax, only because most of the money most taxpayers send to the IRS every year technically counts as another kind of tax. Also, 47% was only true at the bottom of the worst recession in seventy years.” Motte: “Half of Americans pay no taxes!”
– Davislor
2 days ago
|
show 2 more comments
8
As your user name says "A Foreign Scientist", check your visa against this list. There is a paragraph that develops this statement "A NONRESIDENT ALIEN is not liable for the self-employment tax." irs.gov/individuals/international-taxpayers/…
– user662852
Mar 21 at 16:13
1
Thanks -- I have an I-765 EAD and therefore I am a resident alien.
– A-Foreign-Scientist-2018
Mar 21 at 16:38
14
You will need to verify whether you are a non-resident for tax purposes - this is different from immigration definition. If you are a NR for tax, you cannot use Turbotax, as it does not offer support for this - find software that support form 1040NR (non resident).
– Najel
Mar 21 at 16:59
1
@Davislor - the urban legend is about income tax, not just any random duty on a gallon of gas.
– Davor
Mar 21 at 22:43
@Davor Seems my comment was removed. I’ll respect that. I note that nobody who repeats that talking-point ever puts it in context. Bailey: “That’s technically true only of one kind of tax, only because most of the money most taxpayers send to the IRS every year technically counts as another kind of tax. Also, 47% was only true at the bottom of the worst recession in seventy years.” Motte: “Half of Americans pay no taxes!”
– Davislor
2 days ago
8
8
As your user name says "A Foreign Scientist", check your visa against this list. There is a paragraph that develops this statement "A NONRESIDENT ALIEN is not liable for the self-employment tax." irs.gov/individuals/international-taxpayers/…
– user662852
Mar 21 at 16:13
As your user name says "A Foreign Scientist", check your visa against this list. There is a paragraph that develops this statement "A NONRESIDENT ALIEN is not liable for the self-employment tax." irs.gov/individuals/international-taxpayers/…
– user662852
Mar 21 at 16:13
1
1
Thanks -- I have an I-765 EAD and therefore I am a resident alien.
– A-Foreign-Scientist-2018
Mar 21 at 16:38
Thanks -- I have an I-765 EAD and therefore I am a resident alien.
– A-Foreign-Scientist-2018
Mar 21 at 16:38
14
14
You will need to verify whether you are a non-resident for tax purposes - this is different from immigration definition. If you are a NR for tax, you cannot use Turbotax, as it does not offer support for this - find software that support form 1040NR (non resident).
– Najel
Mar 21 at 16:59
You will need to verify whether you are a non-resident for tax purposes - this is different from immigration definition. If you are a NR for tax, you cannot use Turbotax, as it does not offer support for this - find software that support form 1040NR (non resident).
– Najel
Mar 21 at 16:59
1
1
@Davislor - the urban legend is about income tax, not just any random duty on a gallon of gas.
– Davor
Mar 21 at 22:43
@Davislor - the urban legend is about income tax, not just any random duty on a gallon of gas.
– Davor
Mar 21 at 22:43
@Davor Seems my comment was removed. I’ll respect that. I note that nobody who repeats that talking-point ever puts it in context. Bailey: “That’s technically true only of one kind of tax, only because most of the money most taxpayers send to the IRS every year technically counts as another kind of tax. Also, 47% was only true at the bottom of the worst recession in seventy years.” Motte: “Half of Americans pay no taxes!”
– Davislor
2 days ago
@Davor Seems my comment was removed. I’ll respect that. I note that nobody who repeats that talking-point ever puts it in context. Bailey: “That’s technically true only of one kind of tax, only because most of the money most taxpayers send to the IRS every year technically counts as another kind of tax. Also, 47% was only true at the bottom of the worst recession in seventy years.” Motte: “Half of Americans pay no taxes!”
– Davislor
2 days ago
|
show 2 more comments
2 Answers
2
active
oldest
votes
The 15% you're seeing is self-employment tax. The standard deduction still applies, and you are not paying any federal income tax. Self-employment tax pays for social security and medicare, normally employees and employers split those, the self-employed pay the full 15.3% themselves.
Self-employment tax is based on the business net profit, so any business expenses associated with this income can be used to offset income and reduce the tax liability. If you had to fly in and stay at a hotel, for example, those costs should be factored in.
In some cases, honoraria is mis-classified as Nonemployee Compensation (Box 7) instead of Other Income (Box 3). Which box is appropriate depends on the nature of your engagement, Other Income would typically not be subjected to self employment tax.
Edit: I was remembering common mis-classification issues at universities with fellowship income, not honoraria. Honoraria is sometimes mis-classified, but in your case I would guess Box 7 is proper, but could still be worth looking into further.
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
14
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
9
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
5
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
5
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
2
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
|
show 10 more comments
Self-employment tax is basically you covering the medicare and social security "tax" that would have been covered by your employer if you were on their payroll. The standard deduction is for income tax that you should not be subject to. It does not apply to self-employment tax.
Note that if you were an employee, you still would have paid half of that amount (7.65%) in the form of withholdings from your paycheck.
edited Mar 21 at 23:06
Brythan
17.8k64059
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
6
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
6
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
3
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
5
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
3
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
|
show 4 more comments
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2 Answers
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2 Answers
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The 15% you're seeing is self-employment tax. The standard deduction still applies, and you are not paying any federal income tax. Self-employment tax pays for social security and medicare, normally employees and employers split those, the self-employed pay the full 15.3% themselves.
Self-employment tax is based on the business net profit, so any business expenses associated with this income can be used to offset income and reduce the tax liability. If you had to fly in and stay at a hotel, for example, those costs should be factored in.
In some cases, honoraria is mis-classified as Nonemployee Compensation (Box 7) instead of Other Income (Box 3). Which box is appropriate depends on the nature of your engagement, Other Income would typically not be subjected to self employment tax.
Edit: I was remembering common mis-classification issues at universities with fellowship income, not honoraria. Honoraria is sometimes mis-classified, but in your case I would guess Box 7 is proper, but could still be worth looking into further.
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
14
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
9
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
5
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
5
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
2
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
|
show 10 more comments
The 15% you're seeing is self-employment tax. The standard deduction still applies, and you are not paying any federal income tax. Self-employment tax pays for social security and medicare, normally employees and employers split those, the self-employed pay the full 15.3% themselves.
Self-employment tax is based on the business net profit, so any business expenses associated with this income can be used to offset income and reduce the tax liability. If you had to fly in and stay at a hotel, for example, those costs should be factored in.
In some cases, honoraria is mis-classified as Nonemployee Compensation (Box 7) instead of Other Income (Box 3). Which box is appropriate depends on the nature of your engagement, Other Income would typically not be subjected to self employment tax.
Edit: I was remembering common mis-classification issues at universities with fellowship income, not honoraria. Honoraria is sometimes mis-classified, but in your case I would guess Box 7 is proper, but could still be worth looking into further.
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
14
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
9
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
5
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
5
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
2
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
|
show 10 more comments
The 15% you're seeing is self-employment tax. The standard deduction still applies, and you are not paying any federal income tax. Self-employment tax pays for social security and medicare, normally employees and employers split those, the self-employed pay the full 15.3% themselves.
Self-employment tax is based on the business net profit, so any business expenses associated with this income can be used to offset income and reduce the tax liability. If you had to fly in and stay at a hotel, for example, those costs should be factored in.
In some cases, honoraria is mis-classified as Nonemployee Compensation (Box 7) instead of Other Income (Box 3). Which box is appropriate depends on the nature of your engagement, Other Income would typically not be subjected to self employment tax.
Edit: I was remembering common mis-classification issues at universities with fellowship income, not honoraria. Honoraria is sometimes mis-classified, but in your case I would guess Box 7 is proper, but could still be worth looking into further.
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
The 15% you're seeing is self-employment tax. The standard deduction still applies, and you are not paying any federal income tax. Self-employment tax pays for social security and medicare, normally employees and employers split those, the self-employed pay the full 15.3% themselves.
Self-employment tax is based on the business net profit, so any business expenses associated with this income can be used to offset income and reduce the tax liability. If you had to fly in and stay at a hotel, for example, those costs should be factored in.
In some cases, honoraria is mis-classified as Nonemployee Compensation (Box 7) instead of Other Income (Box 3). Which box is appropriate depends on the nature of your engagement, Other Income would typically not be subjected to self employment tax.
Edit: I was remembering common mis-classification issues at universities with fellowship income, not honoraria. Honoraria is sometimes mis-classified, but in your case I would guess Box 7 is proper, but could still be worth looking into further.
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
edited Mar 21 at 15:52
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
answered Mar 21 at 15:34
Hart COHart CO
33.3k57894
33.3k57894
14
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
9
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
5
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
5
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
2
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
|
show 10 more comments
14
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
9
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
5
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
5
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
2
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
14
14
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
Yes. If you were a poor person earning that amount in W2 wages, you'd have had the ~15% taken out before you even got your paycheck.
– jamesqf
Mar 21 at 17:11
9
9
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
@paulj: Your memory is a bit lacking. The social security tax (larger portion of FICA stops), but not at 80k, more like 128k or 130k, The medicare portion doesn't stop, and in fact goes up (see "Additional Medicate Tax"; that threshold for that to kick in is typically 200k).
– Ben Voigt
Mar 21 at 17:46
5
5
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
@GalacticCowboy: Yes, that half won't appear on a W2 or paycheck in any shape or form, it's already been taken out (as jamesqf said). The other half does appear as social security and medicare withholding. It's all a government scam to make you think social security and medicare are only costing you half as much as actually is being taken.
– Ben Voigt
Mar 21 at 19:52
5
5
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
@paulj Social security is a net progressive tax because the benefits received climb slower than the tax paid. That is, you buy insurance for yourself, and you pay a progressive tax to subsidize insurance for people with lower incomes. The benefits hit a cap, which is why the tax also is capped.
– user71659
Mar 21 at 20:35
2
2
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
@GalacticCowboy: It is, because all of it is a cost of employing the person. But only half of it counts toward one's "total compensation". That's true for self-employed as well, the "employer share" FICA taxes that they have to pay are excluded from gross income.
– Ben Voigt
Mar 22 at 0:15
|
show 10 more comments
Self-employment tax is basically you covering the medicare and social security "tax" that would have been covered by your employer if you were on their payroll. The standard deduction is for income tax that you should not be subject to. It does not apply to self-employment tax.
Note that if you were an employee, you still would have paid half of that amount (7.65%) in the form of withholdings from your paycheck.
edited Mar 21 at 23:06
Brythan
17.8k64059
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
6
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
6
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
3
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
5
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
3
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
|
show 4 more comments
Self-employment tax is basically you covering the medicare and social security "tax" that would have been covered by your employer if you were on their payroll. The standard deduction is for income tax that you should not be subject to. It does not apply to self-employment tax.
Note that if you were an employee, you still would have paid half of that amount (7.65%) in the form of withholdings from your paycheck.
edited Mar 21 at 23:06
Brythan
17.8k64059
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
6
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
6
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
3
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
5
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
3
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
|
show 4 more comments
Self-employment tax is basically you covering the medicare and social security "tax" that would have been covered by your employer if you were on their payroll. The standard deduction is for income tax that you should not be subject to. It does not apply to self-employment tax.
Note that if you were an employee, you still would have paid half of that amount (7.65%) in the form of withholdings from your paycheck.
edited Mar 21 at 23:06
Brythan
17.8k64059
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
Self-employment tax is basically you covering the medicare and social security "tax" that would have been covered by your employer if you were on their payroll. The standard deduction is for income tax that you should not be subject to. It does not apply to self-employment tax.
Note that if you were an employee, you still would have paid half of that amount (7.65%) in the form of withholdings from your paycheck.
edited Mar 21 at 23:06
Brythan
17.8k64059
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
edited Mar 21 at 23:06
Brythan
17.8k64059
edited Mar 21 at 23:06
Brythan
17.8k64059
edited Mar 21 at 23:06
Brythan
17.8k64059
17.8k64059
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
answered Mar 21 at 15:33
D StanleyD Stanley
57.7k10169176
57.7k10169176
6
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
6
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
3
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
5
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
3
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
|
show 4 more comments
6
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
6
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
3
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
5
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
3
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
6
6
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
If you were an employee, I'm pretty sure you would have paid exactly the same, no matter how it's phrased. We have the same system here, "half paid by employer, half by employee", and that always works out to the employee paying all of it. By nature, it's not a tax on the business, but a tax that takes some of what the company spends on the employee away from the employee.
– Nobody
Mar 21 at 20:14
6
6
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
No, you misunderstand. Saying that the employer pays a part is just a book keeping trick. For both the employer and the employee, it's like the employee pays both parts. The employer only cares about total cost for the employee. The employee only cares about what they actually get to spend. The difference is the tax, no matter how you "divide" it between them both.
– Nobody
Mar 21 at 21:30
3
3
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
@Nobody Not true. If an employer pays an employee $100 gross, their total cost is $107.60 - the salary plus their portion of FICA/MC. If they pay a contractor $100, their total cost is $100. The government gets $15 either way.
– D Stanley
Mar 21 at 21:36
5
5
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
@DStanley See en.wikipedia.org/wiki/Tax_incidence "The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. <br>[...] some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
– Acccumulation
Mar 21 at 21:51
3
3
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
@DStanley And that's one of the reasons why a contractor charges more than you'd typically pay an employee doing the same work.
– Dmitry Grigoryev
2 days ago
|
show 4 more comments
protected by JoeTaxpayer♦ Mar 21 at 20:16
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8
As your user name says "A Foreign Scientist", check your visa against this list. There is a paragraph that develops this statement "A NONRESIDENT ALIEN is not liable for the self-employment tax." irs.gov/individuals/international-taxpayers/…
– user662852
Mar 21 at 16:13
1
Thanks -- I have an I-765 EAD and therefore I am a resident alien.
– A-Foreign-Scientist-2018
Mar 21 at 16:38
14
You will need to verify whether you are a non-resident for tax purposes - this is different from immigration definition. If you are a NR for tax, you cannot use Turbotax, as it does not offer support for this - find software that support form 1040NR (non resident).
– Najel
Mar 21 at 16:59
1
@Davislor - the urban legend is about income tax, not just any random duty on a gallon of gas.
– Davor
Mar 21 at 22:43
@Davor Seems my comment was removed. I’ll respect that. I note that nobody who repeats that talking-point ever puts it in context. Bailey: “That’s technically true only of one kind of tax, only because most of the money most taxpayers send to the IRS every year technically counts as another kind of tax. Also, 47% was only true at the bottom of the worst recession in seventy years.” Motte: “Half of Americans pay no taxes!”
– Davislor
2 days ago