My Macroeconomics 101 class claimed it's been "proven" the full cost of payroll taxes is born by the employee. It's obvious when you are self-employed that's the case, it's less obvious on W-2, but the net effect is the same.
Going from "Payroll Cost" on the Company Income Statement to "Net Benefit" on the Family Annual Budget, $140,000 becomes about $15,000, and actually often times much less, or negative.
You have to take a careful accounting of where all the money is going, and what your expenses would have been had you NOT earned any of that money, and just stayed home. Unfortunately, it's an extremely demoralizing exercise.
If you go a step further, and even say I'm going to earn some gray-market money off-the-books from home instead of taxable income... then you really do just throw in the towel. But all the numbers I'm quoting are assuming the completely legal and above-board approach.
The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash. If you take a full and honest accounting, you aren't actually paying yourself anything, you're mostly just paying government taxes and forgoing government benefits. Think of it as the unwritten startup tax credit if it makes you feel better! :-)
> My Macroeconomics 101 class claimed it's been "proven" the full cost of payroll taxes is born by the employee.
Whether or not that's true, that's already reflected in you showing the full cost of payroll taxes (employee + employer share) as an expense to the employee. What you failed to do is show all of the income that pays that expense (including the money from the employer that goes directly to paying the employer share) as part of the income from which that cost was being paid.
> The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash.
Perhaps its worse for your company, OTOH, it mitigates the risk to you should the company -- as many do -- fail, since in that case you will have forgone labor income for equity in the failed firm.
Actually, only half (the employer share) is.