Paying Social Security Taxes

[PSDStu]

Got into a discussion about whether or not someone who is self-employed is required to pay into the SS system.

I thought if you were self employed, say like a farmer, that you didn't have to pay......but then you wouldn't get SS when you got old enough to retire.

Not sure if this is correct or not?

Stu

 

[MikePA]

A Google for "self employed and social security" yields 22,800 hits.

Click Here for the answer from SSA.

 

[Farmwithjunk]

Got into a discussion about whether or not someone who is self-employed is required to pay into the SS system.

I thought if you were self employed, say like a farmer, that you didn't have to pay......but then you wouldn't get SS when you got old enough to retire.

Not sure if this is correct or not?

Stu

NOT

You most certainly DO have to pay. and pay. and pay, and pay, and pay some more.

 

[Double Orange]

As an employee, you pay 7.5% and your employor pays 7.5%.

Self employed persons pay the full 15% out of their pocket.

 

[ToadHill]

The only way I know of to avoid SS taxes if you are self employed is to not take a salary and at the end of the year to have the company pay you a dividend from it's profits the same as if you had a stock dividend from a company like GM. If your company makes a big profit each year and you don't collect any salary it will look strange on your corporate tax forms.

 

[ultrarunner]

Maybe that's why Lee Iacocca's salary at Chrysler was $1 a year?

 

[randy41]

The only way I know of to avoid SS taxes if you are self employed is to not take a salary and at the end of the year to have the company pay you a dividend from it's profits the same as if you had a stock dividend from a company like GM. If your company makes a big profit each year and you don't collect any salary it will look strange on your corporate tax forms.

If you have a C corp than you will be paying double tax on the dividend so that would be a bad idea.
You must pay SE tax on your C or F net income unless it is under $400.
If you have an S corp than you could pay yourself a reasonable salary and the resultant payroll taxes and then take the rest out as a distribution with no double tax.

 

[MikePA]

Maybe that's why Lee Iacocca's salary at Chrysler was $1 a year?

No. That was purely symbolic for the time when Chrysler was going through tough financial times.

 

[ultrarunner]

No. That was purely symbolic for the time when Chrysler was going through tough financial times.

Lee made out big time with his stock options based on his performance in getting Chrysler back in the Black.


Compensation... I friend of mine owns a successful contracting business he started 35 years ago. He does not take a salary. The bulk of his income is derived by renting his warehouse and equipment yard to his contracting business. His other income was dividends from the corporation.

 

[ToadHill]

Randy, had an S corp.