@VolvoGirl wrote:
@macuser_22 I know you don't pay SE tax on $400 or less Net Profit but if you have more then don't you pay it on the whole amount? I think the 92.35% refers to something else.
You pay 15.3% SE tax on 92.35% of your Net Profit ( If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.
If you have to file a tax return for any reason, you must report and pay tax on all your income. So here, the boyfriend will owe about $900 (so far) based on gross income of $6000 and no expenses. (Under $12,400 of net profit, he will owe no income tax but will owe self-employment tax.)
The exact tax formula is, I think, 7.65% of net profit, plus 7.65% of 92.35% of profit. I just say "roughly 15%" and it's close enough for discussion purposes.
The taxpayer did not ask, but the boyfriend should be keeping records of any work-related expenses, so they can be deducted on schedule C to reduce the taxable profit.
