As anyone who has ever decided to start a business can tell you, paying taxes is one of the biggest challenges and drawbacks of being in business for yourself.
If you’re self-employed, you have to pay an extra share of self-employment taxes (the payroll taxes that pay for Medicare, Social Security, unemployment benefits and other ongoing government programs).
If you’re an employee, these taxes get withdrawn from your paycheck and you might not notice how much you’re paying. But even as an employee, payroll taxes add up to about 7.5% of your income (up to $90,000 – any income over that amount is taxed at a lower rate for payroll tax purposes).
When you start a business and become your own employer, if you’re paying taxes as a sole proprietor, you have to pay TWICE as much payroll tax as you used to pay as an employee – both the 7.5% employee share and the 7.5% employer share. This means that about 15% of your business income is going to payroll taxes. Read More→
