Michael

Use the following self employment tax calculator and read the information below it and that should answer your questions (income is after business expenses to calculate self employment tax). You will notice that the calculator indicates a self employment tax of 14.13% instead of 15.30% and that is because it calculates the FICA tax business deduction for you (click on view report to see how it is calculated). Also your income decreases to calculate income taxes. Therefore you save on both the self employment tax (unless your income exceeds the maximum amount that can be taxed as self employment tax) as well as income taxes due to the expense deduction for the employer share of the self employment tax.

In a nutshell assuming you don't have any other income except business income, if your income was $100,000 after business expenses, you'd pay a $14.13% self employment tax and that income will be adjusted to $92,350 and from that you would subtract personal deductions (either the standard deduction or itemized deductions) and exemptions to get the adjusted income where income tax is applied.

Self-Employment Tax Calculator

FICA Adjusts: Income Subject to Payroll Tax Increases in 2014

jmood

One hopes Turbo Tax is fool prof.

That's what I used in the few years I was self employed.

Michael, thanks for the tax calculator (and explanations) but it didn't really help me, as you have to (patiently) make sure you understand each and every line item, which I don't.

Steve_

Inversion is essentially putting your HQ in a tax haven. Or a jurisdiction with lower corporation taxes anyway, which is pretty much anywhere other than the US, except Japan. You still have to pay US tax on your US-source income but there are ways of moving your profits around to reduce it to the bare minimum.

Steve_

Most simply put, FICA is calculated on your earnings, so say your earnings are $100,000, the employer's part is 7.65% and the employee's is 7.65%. So the cost to the employer is $107,650. So being self-employed you pay both halves. Hence the reason you need to negotiate a higher amount than if you were directly employed. Although as Michael pointed out there is a deduction.

Steve_

TurboTax is Canada's way of being able to accurately calculate what the US is worth, so when the US inevitably goes bankrupt, Canada will know how much to pay in order to annex the nice bits.

Michael

I'm not sure who you are thinking of but Intuit was started up in Palo Alto and currently has it's headquarters in Mountain View.