How to Calculate
Self-EmploymentTaxes

Pay, $92,350
Your Share of
Payroll Taxes,
$7,650
(Before other taxes are
withheld)
If you earned $100,000 as an
employee, then you would
expect $7,650 (7.65%) to be
withheld from your pay for
payroll taxes.
Employee

(Before other taxes are
withheld)
Your Employer is also paying
the same amount in payroll
taxes on your behalf, 7.65%
of your income.
However…
When you’re SELF-employed
you have to pay both the
employer and employee
portions of the payroll tax.
But the formula is NOT just a
straight double of your
payroll tax rate from 7.65% to
to 15.3%
Employee
Pay, $92,350
Your Share of
Payroll Taxes,
$7,650
Employer's Share
of Payroll Taxes,
$7,650

(Before other taxes are
withheld)
Adding the “employer’s share”
slice grew the overall money pie
from $100,000 to $107,650.
If your self-employment income
is $100,000 you don’t pay the
same amount of payroll tax out
of your $100,000 that an
employee/employer
combination is paying out of
$107,650
..and you shouldn’t!
Self-Employed
Pay, $92,350
Your Share of
Payroll Taxes,
$7,650
Employer's Share
of Payroll Taxes,
$7,650
Why the math
gets tricky:
(Before other taxes are
withheld)

The IRS allows you to subtract
7.65% of your self-employment
income before you calculate
the self-employment tax. In
our $100,000 example it looks
like this:
15.3% X (1-0.0765) X $100,000
= 15.3% X 0.9235 X $100,000
= $14,130
(or 14.130%)
Self-Employed
The IRS
Solution!
Pay, $92,350
Your Share of
Payroll Taxes,
$7,650
Employer's Share
of Payroll Taxes,
$7,650
(Before other taxes are
withheld)

Paying 14.130% in Self-
Employment taxes isn’t fun, but
it’s better than paying 15.3%.
In this example it’s $1,170 better!
And now you know why the IRS has that goofy adjustment formula
when figuring your self-employment tax
If you have questions contact me at http://pimtax.com/contact-form