If I exceeded the income cap for FICA (not medicare, I believe that has no cap) and am now an independent contractor, I gather that I don't need to pay my employee side of self-employment tax. However, do I still have to pay the *employer* side - the fact that cap was reached earlier in the year w/ a different employer is irrelevant to this new employer (myself) from a tax liability standpoint? Thanks.
You've got it correct. Neither you as employee nor you as (self) employer pays. When you file your 1040 end of year, you'll use schedule SE to calculate and then consider that as an employee you formerly paid in enough.
ChEAr$, Harlan Lunsford, EA n LA
It gets taken off your tax when you fill out the 1040 and Sched C, whatever the rule is. There's no direct payment for it. It's just a liability cancelled. An independent contractor simply pays a higher rate for FICA; there's no distinction between employee side and employer side.
-- snipped-for-privacy@mindspring.com
On the internet, nobody knows you're a jerk.
If you are reporting your business activities on Schedules C and SE then you will stop paying both halves when you reach the limit. If your business is a corporation and you are an employee of that corporation the employer will have to withhold FICA until you reach the limit with that employer. When you file your 2007 income tax return you will get a credit for the excess withheld by all your employers. Your corporate employer will NOT get a refund or credit for its matching half. Regards, Bill
It would appear from form SE that a self employed person does not have to pay more than 2.9% on income in excess of $94,000. In other words,you don't have to pay the "employers part" of the tax over $94,000 of incomer. ed
No, you don't have to pay any of the FICA portion of SE tax. See Schedule SE of the 1040.
-- Phil Marti Clarksburg, MD
If you paid the maximum SS tax (based on gross wages) prior to becoming a sole proprietor, I doubt that you owe any SS tax for the rest of the year. Of course, you will still owe Medicare taxes (employee and employer) on your self employment income. Use Schedule SE to calculate the amount due, it will take into account amounts that have already been paid as a W-2 employee.
wrote
If you are self-employed in this business, then no additional payments are due for Social Security. If you are the shareholder/employee of your corporation (ie: you get wages) then both halves get withheld/paid at the employer level. You, as an individual, would get your withheld excess back and the company will not. Talk to a local CPA or EA about these issues and others surrounding your business and the allowed deductions and required taxes.
-- Paul A. Thomas, CPA Athens, Georgia
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.