Fema Employment
Question about self-employment tax (related to Schedule C)?
If I file a Schedule C or Schedule C-EZ, and I have a profit of over $400, is there any circumstance where I DON'T have to file Schedule SE (Self-Employment tax). I file a Schedule C (or C-EZ) because my "business" is that I am a greyhound owner. This will be my first year turning a profit. Upon looking at Schedule C, it appears as if I have to also file a Schedule SE because I am "self-employed". (This results in an additional 15.3% tax...basically for Social Security taxes.) I have a "day job", so to speak. Greyhounds are not my livelihood. Yet, as far as the greyhounds are concerned, I still have to file this form? It doesn't really seem fair. If I won $50,000 from the lottery, I would have to pay Federal taxes and State taxes on it. But, if I make a $3000 profit from my greyhounds, I have to pay Federal taxes, State taxes, AND Social Security taxes? Is this correct? Thanks.
Public Comments
- Correct. Winning the lottery does not generate earned income. Making $3,000 profit from a small Greyhound business is earned income just like $3,000 in wages is earned income. Both are subject to employment taxes.
- If you make $3000 and you will be only paying $344 to FICA and $80 to Medicare which it is not that bad. Good news, you can file a schedule C or C-EZ to write off on your taxes so you will only pay less tax. Good Luck!
- I understand you concern. The greyhound is a business, the lottery is a benefit. Although you still have to claim both. The lottery is also taxed. It is not considered generated income. Any self employed business is required to pay into social security. When your employed you pay into social security. Only difference is as self employed you pay all of it. As an employee you only pay half and your employer pays the other half. The reason most people don't pay tax on lottery winnings is because they can show proof that they lost as much as they won. Therefore it becomes a wash, at least to the federal. Each state varies it tax. Some states don't even have state tax.
- When you have a regular job you are paying 1/2 of your social security taxes. Look at your pay stub. The business pays the other half. When you are self employed you pay 1/2 of the ss taxes.
