Self-Employment Taxes
Everyone wants to make a bright future for himself or herself by working in a high-paying job or by working for one’s benefit. The taxes you pay when you are self-employed are intended to cover the social security benefits and Medicare coverage that would otherwise be paid if you worked for somebody else. Employees pay these taxes by a certain amount withheld from their salaries or any form of compensation. Those are who are self-employed also need to pay both these two taxes for the day when they will eventually retire from working. Those considered self-employed are those who operate a business as sole proprietor, a member of a professional partnership (such as doctors in clinics, lawyers working in a law firm as a partner or an accountant in an accounting firm), independent contractors and generally anyone who is in business for himself and does not derive any income by working for someone else.
The Doctor is In!
These self-employment taxes have been made mandatory to force those who are self-employed to build up a retirement nest egg. It is very easy to spend money as it is earned or to spend it on necessary business expenses. But the mandatory nature of these taxes make those self-employed individuals to prepare for the day when they retire and no longer able to work at their business. There are many persons who fall under this category such as farmers who own and till their own farmland, actors and actresses in Hollywood, TV repair technicians who own their shop and car repair mechanics with their own motor repair shops. The tax rates are almost the same for employed individuals but with a tax-deductibility provision in determining the actual income tax due to the government.
Assess your own tax.
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