I have been working as an Independent Contractor for my employer as of 9/11/08. I didn’t have a paycheck by the 9/15 so I will be paying my income from 9/11 on by the 01/15/09 quarterly pay date for small businesses. By the end of the year I will have earned about ,400 from this job. The only deduction I have is about for transportation.

I also held another job earlier in the year from which I earned about 0. Social Security and Medicare were witheld, but not income tax. Altogether I will have earned under the ,200 limit for the entire year of 2008.

What I am unsure of is if I still need to pay income tax. My quarterly earnings are such that I would have earned a taxable amount had I earned that much every quarter, so I am confused about that.

Also, how much of the 15.3% SS&M do I need to pay? I’ve seen literature talking about how half of Social Security and Medicare is usually paid by employers, half of it can be deducted from net earnings…it’s all very very confusing to me.

If anyone can give me an answer, or clarify this that’d be great. I’m not in the market for consultants (I already know some.)

IRS says I owe 00 from miscalcuation on Sch SE, I think they are wrong?
Ok so I have a side business and I collected some 0k from clients, but I paid people to do the work to the tune of 5k. I paid them by check, and issued them 1099’s, and submitted a 1096, and I used my EIN that I’ve been using for 3 years.

I put the 5k as a deduction on my schedule C, just like I always do, but this year I get a letter saying I made a mistake on my calculation of subj:
Schedule SE and that I owe some 00. They mention the SCH SE, and the 6251 (AMT) but say nothing about SCH C.

I find it suspicious that the $$$ amount of the discrepency is almost exactly 2.9% of the 5k ( I maxed out the other part of Fica taxes with my day job.)

Now the IRS says to challenge this I should fax them my SE, AMT and they will take a look. I don’t think they have enough information, so I also sent them copies of my 1040, 1099’s I mailed out, and the 1096. I stupidly forgot the Schedule C.

My question is did I miss something or am I supposed to pay Medicare (the 2.9%) of the 5k my consultant staff is supposed to pay? Or is there something else going on here?

I might be completely off-base with the 2.9%, I just can’t think of any other reason they think I made a 00 mistake.

TIA

Additional Details
I originally paper filed. I use a tax excel spreadsheet to do my taxes.

In the old days, the IRS would send a very clear list of forms/line #’s that are being changed and the mistake (either theirs or mine) was very clear. all they told me this time is that they "changed" the schedule se, WTF is with that? why can’t they tell me old vs new value for what they corrected?

It doesn’t make sense that they simply "left out" the 125k on the schedule C, if they did that I would of been hit with a whole lot more than 00 on Sch SE.

I know there is no limit on the medicare portion of of my income, but the 5k is NOT INCOME is was an EXPENSE of my business. On my schedule C, I take the money I collected, the 0k, and then I get to subtract my expenses of the business, the materials I used, etc, and my biggest expense was the 5k I spent on contractors. That 125k wasn’t my income its theirs.

I had a phone number to call. all I got was the front desk who said to fax in the sheets SCH SE, and AMT 6251. They wouldn’t put me through to anybody who knew about anything. Last time I got a letter like this, I called with the id#, I was put through to a case worker who knew the issue, and we had the solution worked out in 10 minutes.
I believe I did do my SE correctly. So why did they charge me 00 supposedly for a "mistake" on my SE?

If my SE taxes go up, so should my AGI, (as per my schedule C ) NO? so that means my regular taxes should of changed, but they didn’t.
yup just checked SSI withheld: 00 (me and spouse) and Sched SE added 0.

yes, I know I asked this question about a week ago. I was hoping for some better insight with the weekend crowd.
katie, there can’t be any penalties, all they did was reduce my tax refund. they have the money. I don’t understand why they didn’t mail me a line for line report of what they adjusted. I used to get that when they made adjustments.

4) You worked from 11:00 a.m. to 5:00 p. m. on Tuesday.
You worked from 8:00 a. m. to 4:00 p.m. on Wednesday.
How many hours have you worked?

5) Your annual salary is ,500.00. What is your monthly salary?

6) Your weekly salary is 0.00 plus 8% of your total sales of ,275.00. Calculate your weekly salary.

7) 65% of 800 is what amount ?

75 % of what number is .00?

9) What percentage of 0.00 is 6.00 ?

10) Change 15% to a decimal.

11) Your employer withholds 25% of your salary (for income tax, social security, medicare). Your weekly salary is 0.00 . What will be withheld by your employer ?

12) You make ,500.00 . Your state tax rate is 1 ½ % . You have two allowances ( exemptions ) . Each allowance is ,300.00 . How much do you owe ?

13) Your gross weekly pay is 0.00 . Your Medicare rate is 1.45 %. What is your Medicare deduction ?

14) Your employer takes 8.65 % of your check for Social Security and Medicare .
You make ,800.00 gross pay. What does your employer take or deduct ?

15) The annual healthcare cost for each employee is ,900.00 .
Your employer pays 80% . What do you pay ?

16) The annual healthcare cost for each employee is ,800.00 .
You pay 50% of this and get paid monthly . What is deducted from your paycheck each month?

17) Find the average of the following numbers.
,500.00 ,500.00 ,500.00
,500.00 ,500.00

19) The average of your last five years is ,500.00 . Your pension is 60% of this average.
What is your pension?

20.)Find the total monthly expenses
Monthly living = 5.00
Monthly fixed = ,278.00
Annual Expenses = ,400.00

21) You have made a purchase of .75 .
The state sales tax is 7% and the county tax is 1.25% .
The total tax is ______ and the total purchase price is _______.

22) You have purchased three pounds of hamburger for .97 .
The unit price is_______.

23) Which is the better buy ?
A 20 oz. Bag of chips for .00 or
a 10 oz. Bag for .50 .

24) A purse has a price tag of .99 . It is on sale at a 25% discount .
What is the sales price ?

25) Your business buys a product for 0.00 . Your business model tells you to mark up your product 33% . How much is the markup ?

Then why doesn’t Obama propose raising money for his plans by limiting the home mortgage deduction to the amount it exceeds 7.5 % of a persons income( the current threshold for medical deductions)? Why doesn’t he propose to make health costs fully deductible for those that itemize? And for those that don’t have a special box on the 1040 & EZ. This box would be the deduction for the amount paid for a private healthcare policy (defined by the government as a basic plan). The companies that could give the best rates would get the most business. Why can’t the government define a basic policy? They define the minimum car insurance I need to carry?
Are is a power grab more important? If passed into law, what will be the anticipated date that these government subsidy/ rebate taxes paid back to taxpayer plans will go broke in the same fashion that medicare, medicaid, and social security are anticipated to run out of money and need more tax dollars from EVERYONE?
medicare is not efficient with the same outcomes – at the present time there are restrictions in medicare eligible care that you can get if you have private insurance. Medicare accounts for 40% of all US health spending yet covers far less than 40% of the US population. When they say they are going to reduce medicare costs they do it by reducing the amount the reimburse providers (leaving disadvantaged patients to pick up the difference & more providers opting out of providing Medicare services increasing the stress on heavily regulated hospitals.
Advances in medicine are available more widely and sooner in the US than anywhere else and most come from the US.
Part of the problem is the legal system which encourages and allows patients hit the lottery. Depending on the specialty it is possible for 30-45% of a Drs salary to go to malpractice insurance. That money has to come from somewhere and many Drs leave the field when able rather than tolerate it.

Here’s a little tidbit-
Consider his proposals:

o In effect, he would legislate a 60 percent tax bracket for upper-income Americans, killing all initiative and innovation. He’d raise the top bracket to 40 percent. He’d apply FICA taxes to all income, not just that under 0,000 as at present. So add 40 percent plus FICA’s 12.5 percent plus Medicare’s 2 percent plus state and local taxes averaging, after deduction, at 5-6 percent, and you have a 60 percent bracket.

o He would double the capital gains tax, saddling the 50 percent of Americans who own stock with dramatically higher taxes.

o He’d double the dividend tax, hitting elderly coupon-clippers now retired and depending on fixed incomes.

o He wants to cover 12 million illegal immigrants with federally subsidized health insurance, dramatically driving up costs and forcing federal rationing of healthcare. As in the U.K. and Canada, you will not be permitted certain medical procedures if the bureaucrats decide you are not worth it.

o He proposes requiring Homeland Security operatives to notify terror suspects that they are under investigation within seven days of starting the investigation

o He says that unless they can establish that there is "probable cause to believe that a certain individual is linked to a specific terrorist group," Homeland Security cannot seize his documents and search his business. The current standard is only that the search be "relevant" to a terror investigation.

o In effect, he would legislate a 60 percent tax bracket for upper-income Americans, killing all initiative and innovation. He’d raise the top bracket to 40 percent. He’d apply FICA taxes to all income, not just that under 0,000 as at present. So add 40 percent plus FICA’s 12.5 percent plus Medicare’s 2 percent plus state and local taxes averaging, after deduction, at 5-6 percent, and you have a 60 percent bracket.

He does not oppose -per-gallon gasoline but only says that he wishes there had been a more "gradual adjustment" to the higher prices.

http://gulf1.typepad.com/gulf1_c_morris/2008/06/obamas-new-stra.html

PRETTY SCARY STUFF HUH?

My husband has been with the same employer for 15 years. They started with over 50 employees and today they are down to just the owner and my husband. My husband has been managing the business and working and getting a set salary. The owner does not want to shut down the business but the overhead is getting high (the rent was raised 5 times higher at Jan 2009 which really hurt). The owner does not want to loose my husband and has offered to give him work and 1099 him, This would mean eliminating insurance, WC, and the high rent. He will lease my husband a company truck (for a month) and refer the work to my husband and pay him has an independent contractor. My husband’s employer gave him extra money to get a business licences. His job currently does not provide any sort of life/health/retirement benefits just a salary. I carry the health coverage and we have a retirement set up privately.

Besides the tax (increased SS and Medicare deductions) is there anything else that is bad about being an independent contractor compared to the previous salary position he had.

Local jobs are hard to come by and we have a disabled child and hate to move. The only other option is a job that is salaried which would mean my husband traveling 3-4 days a week out of town, which would be stressful.
The work has been steady, just the overhead is high. It is the oldest business of its kind in our city and they have alot of repeat customers Ovehead went from 4k a month to 13k and for having one employee 13k a month is alot to pay. They still have average 15k month in profit, but after 13k overhead does not leave enough with 4k it was fine.
One person in our city bought up most of the prime downtown and that is when the rent raised. It took 4 months to get a slightly smaller place but it was still higher rent. The owner also stated that if the situation changed, he would bring him in as a partner or re-instate the salary. I have no reason to not believe the owner. Several times there were smaller financial issues with the company and the owner always paid the employees and did not draw his own salary.

I posted this 1/21/08 under business/other/taxes..I didn’t received any answers. Please help if you know….

I had to hire an attorney to get my Social Security. She was paid if it was approved. I paid her, rather ,000. plus was deducted for her payment. The IRS says that was not deductible. So I paid taxes on the total back pay.
Is this right?
I also want to know if my medical insurance payment is deductible. I don’t have the 5 or 7500. that is required. My Medicare plus part D is 0, plus per month, also a group insurance is 0. plus. My co-pay for medicine is 0. plus every 3 month. When one of us is hospitalized, we have a copay.
My husband and I file jointly. I feel that some where there should be a deductible for us. Without the group insurance payment we would far exceed the amount to have deductions, and be totally broke.
We both have spinal problems. My spine is deteriating and we would like to be able to do something outside to make an easier access for me to get in and out of the house. We simply can’t afford to.
Do disabled retires have any deductibles?

I posted this 1/21/08 under business/other/taxes..I didn’t received any answers. Please help if you know….

I had to hire an attorney to get my Social Security. She was paid if it was approved. I paid her, rather ,000. plus was deducted for her payment. The IRS says that was not deductible. So I paid taxes on the total back pay.
Is this right?
I also want to know if my medical insurance payment is deductible. I don’t have the 5 or 7500. that is required. My Medicare plus part D is 0, plus per month, also a group insurance is 0. plus. My co-pay for medicine is 0. plus every 3 month. When one of us is hospitalized, we have a copay.
My husband and I file jointly. I feel that some where there should be a deductible for us. Without the group insurance payment we would far exceed the amount to have deductions, and be totally broke.
We both have spinal problems. My spine is deteriating and we would like to be able to do something outside to make an easier access for me to get in and out of the house. We simply can’t afford to.
Do disabled retires have any deductibles?

I have estimated that I have made approx 35K this year , I am a small business owner and after all my deductions in expenses ( Business rent , and other receipts) I will have walked away with 35K this year , I am filing single with no depend ants in the state or Oregon I have paid no estimated payments and would like to know what I will be looking at as far as all my taxes including Social Security , Fed Income Tax , Sate Income Tax , Medicare ? Also what kind of stimulus will be coming if any?
Thanks..

If you need more info please ask

Gary Benton’s gross weekly salary is 1.00. His weekly federal withholding is .18. The Social Security tax is 6.2 percent of the first ,000.00. The Medicare tax is 1.45 percent of gross pay. The state tax is 1.5 percent of gross pay. Each week he pays .40 for medical insurance. What is Gary’s total deduction?