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You pay all your FICA

08 Jun

When you’re self-employed, you pay the full 15.3% of your earnings. Mark, my CPA friend, calls this the “self-employment penalty.” You have to budget at least 15.3% of your income for FICA tax. Tax laws, Social Security policies, and Medicare funding are subject to change. That’s why I am including this paragraph from the IRS’ web site:

The 2010 Tax Relief Act reduced the self-employment tax by 2% for self-employment income earned in calendar year 2011. The self-employment tax rate for self-employment income earned in calendar year 2011 is 13.3% (10.4% for Social Security and 2.9% for Medicare). For self-employment income earned in 2010, the self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).[i] From Escape the Cubicle

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