

Ask HN: Self employment tax? [US] - hellbanner

I&#x27;m reviewing what my CPA sent me.. it looks like individuals (contractors) get fucked with self employment tax in the US. Is there a way around this? I netted less than 100k and my effective tax rate is almost 40% according to self-employment tax + income tax
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prostoalex
It comes with much more liberal SEP-IRA rules (25% of gross, not capped at
$5,500) and deductions (health insurance purchases are deductible for self-
employed), leave alone the commonly known things, such as deductions for
transportation, entertainment, etc. so you have way more ways to minimize the
taxable portion of the income.

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glitch273
Create an LLC and elect to file as S-corp status for tax purposes. You pay
yourself a fair salary (so that IRS will be content) and the rest can be
considered pass through income taxed only at your income bracket.

For example, say you earned 300k last year. A fair salary for a developer
might be 70k. You pay income tax and self employment tax on the 70k but only
income tax on the remaining 230k.

I am not your lawyer or accountant so take the above advice with caution.

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mpierce9447
If somebody operates as your EOR (Employer of Record) your self employment tax
goes away! You also get taxes deducted out of each pay check allowing for a
much easier budgeting situation. Let me know if you have any additional
questions.

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giaour
"Self-employment tax" is a euphemism for having to pay both the employer and
the employee portions of the payroll tax. There is no separate tax levied on
the self-employed.

The OP would need to find someone to both become their employer of record AND
pay the employer portion of their payroll taxes.

