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New Member
posted May 31, 2019 7:46:56 PM

I have a taxed owed balance which is slightly more than the self-emploment tas I owe. Why doesn't my IRA contribution reduce this amount?

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1 Best answer
Level 3
May 31, 2019 7:46:57 PM

You pay two different types of tax if you are self-employed.  One tax is federal income tax, which is figured on your total income, and reduced by your IRA contribution. 

The other tax you pay is self-employment tax, which is figured on your net profit from Schedule C.  That money goes into your social security account until you reach retirement age. 

The federal income tax is figured with your IRA contribution reducing your total income to a taxable amount; the social security tax is figured only on your self-employment income. 


1 Replies
Level 3
May 31, 2019 7:46:57 PM

You pay two different types of tax if you are self-employed.  One tax is federal income tax, which is figured on your total income, and reduced by your IRA contribution. 

The other tax you pay is self-employment tax, which is figured on your net profit from Schedule C.  That money goes into your social security account until you reach retirement age. 

The federal income tax is figured with your IRA contribution reducing your total income to a taxable amount; the social security tax is figured only on your self-employment income.