SO BABY BOOMERS....
DID OUR FICA TRUST FUND,
GET SWEPT AWAY INTO ,
A 'TWILIGHT ZONE' EPISODE, OR WHAT???'
SOMETIMES english IS A HARD LANGUAGE TO UNDERSTAND???
A tax similar to the FICA tax is imposed on the earnings of self-employed individuals, such as independent contractors and members of a partnership.
(LAWYERS AND SUCH???)
This tax is imposed not by the Federal Insurance Contributions Act but instead by the Self-Employment Contributions Act of 1954, which is codified as Chapter 2 of Subtitle A of the Internal Revenue Code, 26 U.S.C. § 1401 through 26 U.S.C. § 1403 (the 'SE Tax Act'). Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business's net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. It does this by adjusting for the fact that employees' 7.65% share of their SE tax is multiplied against a number (their gross income) that does not include the putative 'employer's half' of the self-employment tax. In other words, it makes the calculation fair because employees do not get taxed on their employers' contribution of the second half of FICA, therefore self-employed people should not get taxed on the second half of the self-employment tax. Similarly, self-employed people also deduct half of their self-employment tax (schedule SE) from their gross income on the way to arriving at their adjusted gross income (AGI). This levels the amount paid by self-employed persons in comparison to regular employees, who do not pay general income tax on their employers' contribution of the second half of FICA, just as they did not pay FICA tax on it either.
© 2016 3D Divine Deadbeat Dad---Alleged - 3/26/16