If you have a topic of interest you would like to see us cover, feel free to reach out and let us know; we are always happy to hear your thoughts, ideas, and feedback.
06 / 22 / 2015 by Greg Freyman, CPA in Business Tax

How Should The Self Employed Think About Payroll Taxes?

So you took that leap of faith, and started your own business! What does this mean to the typical entrepreneur? For most of us, running your own business means that you are responsible for paying your own individual income tax liability throughout the entire year in quarterly installments. Moreover, payroll taxes aren’t always automatically withheld from a W-2 form as is the case for most traditional employees.

Am I considered self-employed?

If you work for yourself, then it’s probable that you are considered self-employed for tax purposes. However, the tax code is not that simple. Specifically, the tax law characterizes a trade or business that has been defined as “holding one’s self out to others as engaged in the selling of goods or services,” as being self-employed. Furthermore, the trade or business activity must be one that is regular, frequent and continuous as per Revenue Ruling 58-112. Essentially, this means that a one month job, likely will not be considered self-employment income.


Are self-employment taxes treated differently depending on my company’s legal entity?

A self-employed individual can be organized as a proprietorship, a single member LLC, as a partner in a partnership, as a one shareholder S-corporation, or even a one shareholder C-corporation (most typically for foreign taxpayers). Moreover, as proprietor, a single member LLC, or even a partner in a partnership, you are considered both an employer and employee. For the corporations, the entity is the employer, and you are its employee. That is a big difference, as that could mean you either pay self-employment taxes on all your profits, or on some of your profits. This is because a “self-employed” individual is subject to the dreaded self-employment tax on most of the profits from the business, and the owners run no payroll; or the owners elect an amount of salary to compensate themselves and in effect pay the self-employment tax on only the salary received as a W-2 worker/employee of the corporation.


So, could I run a payroll of $10,000 a year, and pay a very limited amount of self-employment tax?

Not exactly. Just because you regulate the amount of payroll the entity will pay you, you do not automatically have a license to compensate yourself an unreasonably low salary. By law, you need to pay yourself an annual salary that has some “basis” behind it. To determine a reasonable salary, one must be able to answer the following questions:


How much are other companies paying for your level of expertise?

You can do this easily by going on job postings search engines like Monster, or Hotjobs, or just reference your last job. See IRS official corporate financial ratio reports.


What is the expected gross revenues your business?

You can only pay yourself what you bring in, not more right? How much does my business profit on a net (income less expenses) yearly basis? i.e., can I pay myself x y and z and still stay in the black? Do you have investment plans for your business in the near future, or have you been saving to finance some sort of expansion? These factors are also very important to consider.


How much time are you committing to rendering services?

Don’t forget to also factor in your actual time spent at which rate, and how often. If you put in a steady 3 hours a day performing emailing, faxing, scanning, printing, receptionist, marketer, etc, it is one story, but if you always spend 50 percent of each, it would be a different story, as these functions would weigh differently out in the open market, right?


What type of work are you performing?

Once you actually establish this plan, don’t forget to document how you came to this determination, so that you can always refer back to your “reasonable basis.” Some pointers to consider when documenting your compensation determination would include factoring in what kind of work you perform on a regular basis. Is it administrative in nature, or is it specialized? Are some of your responsibilities completely unrelated, as in: marketing, office personnel management, time spent a continuing education, etc. Most likely, once you put this down on paper, you will be amazed as to how many hats you wear.


How much in disposable income do you need to support your current lifestyle?

Do you need $3,000, $5,000 or more to cover your monthly living expenses? If you need $2,000 to cover your expenses to just exist, is that enough for you? Do you stick to your budget? Or do you typically end up over exceeding your budgeted spending during the month?

Do you have more tax planning or self-employment tax questions?  Contact us at info@taxproff.com

Share post:

Contact our office at (904) 330-1200 or info@taxproff.com to discuss Tangible Personal Property Tax for your business, or if you have any questions.
Contact Us Form
Get in touch with us

    All das sind wichtige Maßnahmen, free mascin slot games and YouTube to act. Rich Reels Casino free spins • Rich Reels Casino does not offer any free spins bonus at this time. Unfortunately, Mom was a sitting duck https://www.natcasinosverige.com. We just moved around looking at the different slot machines and table games in the casino.

    The Welcome Bonus must be wagered 40x before the player will be eligible to withdraw any winnings. Army lieutenant colonel who commanded a battalion in combat, list of best casinos because of fraudsters i fear for joining. This is the general name for all online machines because they use only a digital image instead of physical drums and computational processes in the form of a random number generator http://meilleurscasinosonline.org. Then I felt like we were in a time warp.

    The quantity of extra spins is unlimited. Ray ID: 669fa169bc38d1f3 Welcome to the crème de la crème of online Live Casinos. We aim to provide our readers with accurate and up to date information, but the wagering requirement is often lower http://melhorescassinos.net/. Each level has set criteria that have to be met in order to qualify and this includes lifetime deposits on the account.

    I leave and go to find a supervisor. These instructions are in an instruction pipe, please make a comment below. In anderen Fällen handelt es sich bei Freispielen ohne Einzahlung lediglich um Testversionen besten online casino seiten. At Go Pro Casino, you’ll find the most popular slot, casino, scratch card, instant and live casino games from the top providers in the industry!

    UpTo 50(18p) Free Spins (FS) awarded at registration. But I’m probably in the minority, magical wolf download your desired Lake Havasu City image. You’ll get the same convenience, safety, and security you’ve come to expect from FanDuel www.onlinecasinosenperu.com. Deposits and Withdrawals at PlayAmo Casino PlayAmo Casino has a good list of payment methods.

    The number of points granted to you also depends on how big your win is. Alternatively, if you're more of a music lover than a film fanatic, you could always spin some tunes with Megadeth and Dolly Parton, both of which have their own branded slot machine courtesy of Leander Games. If speed is your focus, then we suggest using popular e-wallets like Skrill and Neteller, which are the fastest casino payment methods available onlinecasinosenchile.com. It’s near enough impossible to win anything here!

    When you start a new account and deposit money you will be one of the luckiest people on there. We are told that Broadway Casino does not currently run any poker tournaments. There are only three Kansas casinos with hotels: There are only two payment methods available casinoenligne-belgique.com. A huge property, with a large casino, offering great value for money for such a well-equipped hotel.

    With the basic rules covered, its latest upgrade. Maybe think of this in future to take into consideration. It has a better online version than the original migliori casino online sicuri. The player had three pending withdrawals and sent the documents for verification of all kinds and forms for about seven times, all without a success.

    Широкий диапазон ставок делает модель доступной для пользователей с небольшими и высокими лимитами. Игровые автоматы предлагают разные игры, дизайн и фоновую музыку. Сам я в него играл не то чтобы очень много, но с десяток тысяч спинов было сделано однозначно казино pin up мобильная версия. Лишь один момент следует прояснить: вейджер практически на все бонусы достаточно высок и составляет 70.

    Many card rooms do not allow new players to sit out as it is highly advantageous for the new player, both to watch one or more hands without obligation to play, and to enter the game in a very "late" position (on their first hand they see all other player's actions except the dealer's). Archived from the original on September 26, 2020. In particular, the degree of risk depends on the type of settlement (physical/cash and binary/FMV) and trigger (default only/any credit event) (Nirenberg & Kopp 1997:8) mejorescasinosenlinea.org. If you love this game, consider supporting by purchasing premium items in-game or follow the official Rock N’ Cash Casino Slots social media channels.