Entries Tagged 'Self-employment' ↓

Self-employed pay the highest income tax rate of any group in the US economy. In 2013 self-employed workers will owe a total tax rate of 25.3 to 43.3 percent on earned income between $400 and $110,000. What is the reason for this?

Employees pay only 7.515 percent for Social Security and Medicare taxes, while self-employed workers pay double that amount, 15.4 percent. 

Why is that? The IRS considers self-employed workers to be “two persons in one,” an employee and an employer. Thus, the self-employed individual must pay the IRS both the employee and the employer halves of Social Security/Medicare tax. Self-employed workers pay twice as much as either an employee or an employer pays for FICA taxes.

The pressure a 15.4 percent flat tax puts on self-employed pushes many self-employed into the IRS deductions trap.

Martha’s story Continue reading →

Even if you haven’t read the first chapter of The Two Trillion Dollar Meltdown and aren’t my age or older, you’ve probably wondered whether the 50s and 60s were a “golden age” for the American middle class and poor.

Looking back, it’s clear that problems we are seeing now stem directly from the demise of the American blue chip corporation as a power in the world. By the end of the 1970s large companies could no longer afford to support the luxury of a prosperous middle class.

Thus began trends such as price-fixing; diversification, conglomeration, mergers and takeovers; attacks on labor; and most importantly, demands for smaller government.

“OK, Nancy, so what does this have to do with self-employment?”

“Absolutely everything!” Continue reading →

In many of his Rich Dad Poor Dad books, Robert Kiyosaki mocks self-employment as a choice that makes sole proprietors even poorer than employees. He’s right, but not for the reason he thinks. Continue reading →