I really like the Web for providing calculators on just about anything. This year I have to watch my taxable income because I'm self-employed and have to pay more on FICA and Medicare.

So I found these three valuable little tools:

1040 Tax Calculator

Self-Employed Tax Calculator

1040-ES Tax Calculator

I don't really have to do quarterly payments, but I'm doing it anyway to match last year's tax bill. That can be done online here:

EFTPS Online Pay IRS

So I was messing around with numbers. If I make $40,000 this year, which is highly likely and maybe even more, then I pay about 14 percent or $4,945 to FICA/Medicare.

But if I make $10,000,000 (very unlikely), it's only 2.8 percent or $279,905.

Huh, I said to myself. That sucks. What if I only had to pay 2.8 percent? My self-employed tax would be $1,120. I daresay that I need that $4,945 minus $1,120 equals $3,825 more than the person hauling down $10 million. I could buy health insurance!

Anyway, thought that was interesting. Just wanted to share the sites for anyone wanting to go the self-employed route.

Being just a weee bit disingenuous there eh AM?

FICA cap for 2007 was $97,500, so it's not going to go any higher than a touch of $12,000 total tax regardless what you earn over $97,500.

That site is ONLY calculating your FICA and Medicare tax payments.

According to the first link you provided:

Tax payments if filing single at $40,000 a year would be $5,086 and put you in the 25% bracket.

At $10,000,000 your tax payment will be $3,477,202 or 35%.

Just thought I would provide ALL of the information for the readers of this thread.

Relax, this is casual conversation. I was surprised that the FICA/Medicaid was still calculated even for the max, which in that calculator is $10 million. Is that an error in the calculator or are we missing something when income heads into the stratosphere?

BTW I did provide the straight 1040 calculator that is in stepped increments of income. So what's the complaint again?

Of course AM- that is if you REALLY claim 10 million dollars- the only people that claim ten million dollars in straight income usually made a few billion- or won the lottery, then you pay the full income tax bracket.

I would be very, very suprised to find a person that had thier net worth increase by 10 million dollars even paid 1% of actual earnings- in fact, if I were in that place- I would fire my accountant for straight up laziness.

FYI Sleeper:

If someone is self-employed, they have to pay both the employer's and the employee's half of FICA and Medicare taxes. Rather than .0765, the figure reported on Schedule SE is 15.3%.

http://www.irs.gov/pub/irs-pdf/f1040sse.pdf
This is a PDF file.

That doesn't apply to a sole proprietorship does it?

If one makes more than $400.00 profit on a Schedule C from a sole proprietorship in a year, then that money is subject to 15.3% on Schedule SE.

Note that line 31 of Schedule C says to carry the profit amount to line 2 of Schedule SE.

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

There is one bright spot. One half of the SE tax (line 27, form 1040) may be subtracted from total income of form (line 22, 1140) to arrive at adjusted gross income (line 37, 1040). It is not, however, a dollar-for-dollar refundable tax credit.

http://www.irs.gov/pub/irs-pdf/f1040.pdf

Boy, this money stuff confuses me. All I know is that I had to write a check for more than fourteen thousand dollars to the IRS this year. That's because I have a regular job (which takes out taxes) and an "extra" job, where I am considered to be an "independent contractor" so I have to do the "self employed" thing.

Good thing I am not philosophically opposed to taxes.

I need to fly to Texas and hang out with you and my big stack of papers, since I just filed an extension.

This is when I REALLY get behind a flat tax.

Yep BoF, so this kinda means that people will be paying some tax unless income is real low, like under $400. That's lemonade stand income. But I guess when people say that the poor don't pay taxes in this country, they discount FICA and Medicaid.

I had a measly $2k year and still ended up paying over $200 in for FICA/Medicaid. No federal income tax though.

CR, I was messing around with the numbers by using the standard deduction and one exemption. You're right, if someone has a $10 million gross income, then there'd be at least one accountant figuring out tax shelters.

Then there's buying a Hummer and claiming the tax deduction if it's in support of your business. Now you can take a Prius deduction too without having to get into a yoga knot proving that it's for business.

I also fantisize about a 15% flat rate across the board, no tricks, no gimmicks, just 15% for everyone. That would be $1.5 million on $10 million of income. It'd be $6,000 on $40,000 of income. It'd be a simple operation on a hand-held calculator. That's probably why we will never see it happen.

And Lord help us if the government tries to figure it out. They cant' even tally votes

AuthorMusician, you need to get with the Democrat terminology... FICA is not a tax, it is an insurance payment!! Same with Medicare!!

Ignore those evil Republicans that want you to be able to take your 15% "contribution" and actually put your name on it for when you retire! Just keep putting money into the pot and hope to collect them. Be sure not to die before you get out what you've "contributed" because those funds are not ear marked for you...

Strange Amlord!

The Social Security Administration calls it a tax.


http://www.ssa.gov/OACT/ProgData/taxRates.html

It's definitely a tax. I never said otherwise.

I said that the Democrats are apt to characterize it as insurance. Of course, part of Social Security is a perverse form of insurance. http://www.ssa.gov/dibplan/index.htm

And before you "call me" on this, I will quote from Barack Obama's book, The Audacity of Hope, pp 178-179.

I am going to call you anyway. You are stereotyping Democrats, based on your interpretation of a passage in one of Barack Obama's book. Obama is the likely Democratic nominee, not a synonym for Democrat.

Not wanting to be totally disagreeable, I concur with you that Republicans are "evil."

Present company excluded, I trust...

Actually, PERA is the insurance premium payment, and only government employees get it. Works sort of like a 401k. In that way it isn't like an insurance premium payment. I pay auto insurance regularly and have never claimed enough to get back what I put in. Also, the pittance that I get refunded now and then doesn't cover what I put in. Some people might claim more, some less, and that's how insurance works. If you claim too much, you get dropped.

I worked for a year at a municipal hospital and got PERA. It is a much better deal. At the end of the year I had the option of taking the money put in, just like that. No penalties or anything, so I took it. Worked out to be about a few grand (on about 60k / year income).

So imagine what you'd have amassed as a postal delivery person after 25 or so years of service.

Now if the Republicans were willing to do PERA for everyone, that'd be cool. Unfortunately, they just want to scrap SS without fixing it. Just get rid of it because it's based on those worthless T-bills and bonds that the Chinese are buying up like hotcakes.

FICA/Medicare are taxes. There, I said it. Maybe we should raise the upper limit on what people pay? Adjust it for inflation or something? I don't know, this is casual conversation. So I'm being casual about it.

Huh? Got a source that "Republicans" want to scrap SS without fixing it? Or a source that says they want to do it because "it's based on those worthless T-bills"? Heck, I'd settle for a source that says T-bills are worthless...

This was just too easy:

President GW Bush on Social Security and IOUs 4-5-2005

He saw pseudo bills/bonds in an age when nobody gets actual bills/bonds but paper that represents the actual bills/bonds. Actual bills/bonds are electronic these days. There are these things called "computers" that work sort of like grocery store scanners . . .

This is your party's POTUS. Sorry.