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After i pay my payroll service as a sole prop. do i still owe more tax? |
as a sole prop. I am the only employee, if i pay myself all money that I bring in, do i owe anymore taxes? I think I understand your reasoning: Since wages are deductible by the employer, and you consider yourself an employee, then you shouldn't pay taxes if all your income goes to your wages. It doesn't work that way. If you are a sole proprietor, you are not an employee and do not receive wages. Your income consists of your net profits after subtracting expenses of generating the income. You will file Schedule C, which figures your profit and loss from your business. You will pay income tax on your net profit, plus about 15% of your net profit for Social Security and Medicare taxes. As a sole proprietor you don't pay yourself through payroll. You take an owner's draw from the business. You then have to make quarterly estimated tax payments using Form 1040-ES. This includes your Self-Employment tax liability. Trying to pay yourself through payroll will only complicate things unnecessarily and will actually cost you MORE since when you are self-employed you don't have to pay FUTA and SUTA taxes. |
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