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iOS Damn taxes.. :-(
- Thread starter detz
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Yuck! Thats why its important to put away a good chunk of each deposit. So when tax season rolls around you'll be able to pay good ole' uncle Sam.
Well.. the good news is, if you are paying out 45% to the government you must be making good money. 
Well.. the good news is, if you are paying out 45% to the government you must be making good money.
It's a good problem to have.
Well.. the good news is, if you are paying out 45% to the government you must be making good money.
I'm not at 45% but it was a serious chunk and I'm definitely not consoled by the above comment. Yes, taxes are a good problem to have but when you get into serious AMT it really starts to get irritating and unfair.
If you make enough from the App store in the U.S., you may have to pay, not just at tax season, but quarterly; and with enough to cover the additional self-employment tax.
If you don't know what you're doing and don't consult a tax accountant, you could well end up paying an additional penalty.
but ianal nor aa.
That might just be federal. My breakdown is 25% for federal, 5% for state and 15% personal income tax. If you're working in the US then you probably at least have to pay 40% unless you make over $102,000/year then the 15% goes down to around 2%.
looking at pay stub
federal (withholding, med/ee and oasdi/ee): 24.8%
state (withholding and oasdi/ee): 5.3%
thats all that was taken out of mine per pay period
federal (withholding, med/ee and oasdi/ee): 24.8%
state (withholding and oasdi/ee): 5.3%
thats all that was taken out of mine per pay period
Pay stubs are difference because the company pays social security and medicare. If you make money on the side or through Apple they don't pay that so you have to pay that 15% so in you're case that's 44.1% tax on everything you make outside of work.
Pay stubs lie. Your employer actually has to pay additional amounts in taxes on top of your salary that you don't see on your pay stub. But someone has to pay it. If not your employer, than you get to pay 15.3%. Add that to your 30%. Add insurance(s), reserves for sickness/holidays/vacation, etc., and you probably need to make nearly double your hourly salary to just break even making money on your own.
In return, you usually get to deduct much of the costs of doing business (developers fees, business licenses, legal/accounting fees, web hosting fees, depreciation on equipment, rent, etc.). At least get a good (Nolo) book on the subject.
but ianal.
Yeah, stupid isn't it?
In the UK if you want to avoid paying the top tax bracket (40% iirc) you setup a limited liability company and then you just have to pay 21% corporation tax and 10% dividend tax (rate goes up if you pay yourself more than £30k roughly).
I don't know if the same is true in the US.
I was under the impression that HMRC had gradually made being a company less and less advantageous for those simply trying to avoid paying more income tax (as you note the dividend rate goes up at high amounts...just when the 40% tax band kicks in). At the lower end of the scale it's probably not worth the effort at least in financial terms. Obviously there are other legal advantages of being a company such as reduced personal liability but you could get indemnity insurance I guess.
It costs very little to setup a company in the UK, and the returns can be minor but it does all add up.
Back in 2000 when I used to run my own company it used to buy my gadgets, pay half my mortgage and bills (as my home address was my place of work) and paying myself a minimum wage I could live and occassionally take out dividends, I think now it's much less efficent as they tied up the loopholes but I imagine it would be worth it in the long run, especially if you are already close to or in the higher tax bracket
Back in 2000 when I used to run my own company it used to buy my gadgets, pay half my mortgage and bills (as my home address was my place of work) and paying myself a minimum wage I could live and occassionally take out dividends, I think now it's much less efficent as they tied up the loopholes but I imagine it would be worth it in the long run, especially if you are already close to or in the higher tax bracket
Well as a sole trader you have to pay income tax on your total turnover which depending on your income could be 40%. As a limited company you only pay 21% on your total turnover regardless of earnings.
Dividends can only be paid out of profits so you only pay dividend tax a) if you choose to pay yourself a dividend and b) only at the amount you pay yourself in dividends (it is completely separate from your turnover).
Also if you pay yourself the maximum amount of tax free allowance (£5,300 ish) a year salary then you do not need to pay national insurance or any other tax and I believe you can also claim tax credits. Then you just make up the rest of your salary with dividend payments assuming that the company is in profit.
Just beware that if you don't pay national insurance your state pension will be rubbish so make sure you keep paying into a private pension fund.
Where are you from? NY is close to %50!
Yes very sad indeed. I took some business classes last year and the ball park figure they gave us was %50 percent for NY. There are variables but it was clear that you have to make a lot of money, as a small business person, if you expect to maintain a reasonable standard of living.
The bigger problem is that current mindset in government is to tax even more which is totally stupid. Unfortunately I've not seen a state nor federal government collectively say that things can not go on as they have in the past. Even with the next great depression looming the mentality is to remove more money from the pockets of the people that actively work to make America great.
It is sad enough to know that they are taking your money at such excessive rates. What is more upsetting is the scum bags that money supports. Be it the welfare mom or the various foreign states that turn around and use that money against us, it is all pretty disgusting. Unfortunately at the federal level we really screwed our selves in the last election. We needed a break but unfortunately the Democrats can't deliver that break as they are the greatest factor in government waste. Frankly it is time in this country for a third party that is focused on freedom and responsibility.
Dave
Yes very sad indeed. I took some business classes last year and the ball park figure they gave us was %50 percent for NY. There are variables but it was clear that you have to make a lot of money, as a small business person, if you expect to maintain a reasonable standard of living.
The bigger problem is that current mindset in government is to tax even more which is totally stupid. Unfortunately I've not seen a state nor federal government collectively say that things can not go on as they have in the past. Even with the next great depression looming the mentality is to remove more money from the pockets of the people that actively work to make America great.
It is sad enough to know that they are taking your money at such excessive rates. What is more upsetting is the scum bags that money supports. Be it the welfare mom or the various foreign states that turn around and use that money against us, it is all pretty disgusting. Unfortunately at the federal level we really screwed our selves in the last election. We needed a break but unfortunately the Democrats can't deliver that break as they are the greatest factor in government waste. Frankly it is time in this country for a third party that is focused on freedom and responsibility.
Dave
It has already been mentioned but PAY STUBS LIE!
What you see as taxes when you work for someone else are really a lie. For some taxes the company has to pay a matching amount so your actual tax rate for things like social security is actually twice what you see on the stub.
I'd like to know what state you are in right now as state income taxes are all over the place. If you run into somebody you know is self employed you should ask them what their final tax bill is.
Dave
What you see as taxes when you work for someone else are really a lie. For some taxes the company has to pay a matching amount so your actual tax rate for things like social security is actually twice what you see on the stub.
I'd like to know what state you are in right now as state income taxes are all over the place. If you run into somebody you know is self employed you should ask them what their final tax bill is.
Dave
From your last paragraph I assume that when you say freedom and responsibility you really mean stinginess and greed?
I don't begrudge paying taxes at all. I think they go to a good cause in general.
It's rubbish if you do so it makes little difference (or at least not if you not going to retire for 30 years)
Benefits that depend on NIC contributions
Your entitlement to the following benefits and/or the amount you can get will depend on your (or in some cases your spouse or civil partner's) NIC contributions:
* Contribution based Jobseeker's Allowance (Class 1 NICs only)
* Incapacity Benefit (if you can't work for long periods due to illness or injury)
* Contribution based Employment and Support Allowance (ESA)
* State Pension
* additional State Pension (Class 1 NICs only)
* Widowed Parents' Allowance
* Bereavement Allowance
* Bereavement Payment
From the UK .gov site.
And while I'm only 35 and not looking at retiring just yet, the quicker you get money into your pension funds the better, just look at the difference between getting a big lump in at the start, compared to a big lump at the end, it really is a shock and the sooner people start pensions the better (another nice thing about having a company is you can pay quite alot into your pension without paying taxes, or at least you could). And for how much NI really costs imagine how you would feel if down the line you had some health issue which meant you couldn't work and suddenly you don't get any benefits/help (I speak from experience as I am partially signted and spent 3, almost 4 years unable to work with detached retina's/operations/follow up surgery/etc/etc). Take it from me PAY YOUR NI (if you live in the UK), for the tiny amount it is you really are much better off paying it (and having your own seperate pension fund)
Not really about programming but I'd like to impart some advice/suggestions where I can.
Your entitlement to the following benefits and/or the amount you can get will depend on your (or in some cases your spouse or civil partner's) NIC contributions:
* Contribution based Jobseeker's Allowance (Class 1 NICs only)
* Incapacity Benefit (if you can't work for long periods due to illness or injury)
* Contribution based Employment and Support Allowance (ESA)
* State Pension
* additional State Pension (Class 1 NICs only)
* Widowed Parents' Allowance
* Bereavement Allowance
* Bereavement Payment
From the UK .gov site.
And while I'm only 35 and not looking at retiring just yet, the quicker you get money into your pension funds the better, just look at the difference between getting a big lump in at the start, compared to a big lump at the end, it really is a shock and the sooner people start pensions the better (another nice thing about having a company is you can pay quite alot into your pension without paying taxes, or at least you could). And for how much NI really costs imagine how you would feel if down the line you had some health issue which meant you couldn't work and suddenly you don't get any benefits/help (I speak from experience as I am partially signted and spent 3, almost 4 years unable to work with detached retina's/operations/follow up surgery/etc/etc). Take it from me PAY YOUR NI (if you live in the UK), for the tiny amount it is you really are much better off paying it (and having your own seperate pension fund)
Not really about programming but I'd like to impart some advice/suggestions where I can.
Wait until you have an employee on the books. Then you have to pay Disability insurance and Unemployment insurance. Then take a look at Health benefits.
My income is a 60-40 split. 60% goes to the Government unfortunately. I have to pay Federal 3 days after writing out the paychecks. They want their money fast!
It's very expensive to run a small business in the US. I think somewhere on the order of 40-50% of the tax base is by small business. I find it amazing that the Gov't keeps making up more taxes and laws to drive us out of business.
My income is a 60-40 split. 60% goes to the Government unfortunately. I have to pay Federal 3 days after writing out the paychecks. They want their money fast!
It's very expensive to run a small business in the US. I think somewhere on the order of 40-50% of the tax base is by small business. I find it amazing that the Gov't keeps making up more taxes and laws to drive us out of business.
