Re:How to be a freelance web developer, part 2
by mgkimsal on Thursday October 07, 2010 @09:49AM
(#1767785)
It's not just that. If that was it, it would just be a case of paying now vs paying later.
I'm simplifying here, but there's something called FICA, which is about 15.2% of your pay. Typically employees have 7.6% withheld, and employers chip in the other 7.6%. It's effectively never paid or counted to the employee in the first place. Someone earning 100k at an employer would see $7600 paid in FICA. A self-employed person has to pay $15200 on the same $100k income (but half of that tax is deductible for other tax calculations - it gets convoluted!)
So... self-employed people are paying 'more' , but the net effect of what the gov't get is the same. You just don't see some of that money as a typically w2 employee.
I'm simplifying here, but there's something called FICA, which is about 15.2% of your pay. Typically employees have 7.6% withheld, and employers chip in the other 7.6%. It's effectively never paid or counted to the employee in the first place. Someone earning 100k at an employer would see $7600 paid in FICA. A self-employed person has to pay $15200 on the same $100k income (but half of that tax is deductible for other tax calculations - it gets convoluted!)
So... self-employed people are paying 'more' , but the net effect of what the gov't get is the same. You just don't see some of that money as a typically w2 employee.