Blended tax rate

[MAR96]

My blended tax rate is almost at 50% this year, and last year it was at 10%. Must be a mistake, and how do i fix it?

[DianeW777]

It depends. There are many factors that determine your tax rate.  We would need you to clarify additional details on your return to provide insight or solutions.

Example: Self employment net profit creates a 15.3% tax for social security and medicare tax (self employment taxes); personal income tax is determined based upon your total taxable income (Line 15, Form 1040), which includes the same net profit from business income.  

[MAR96]

Hello, ive looked more into it, and its that high because of a self employment tax, but i dont know where that tax of about 2000 came from. Its listed under "other taxes"  but all my employer pay and independent contractor work is under "taxable income"  so i have no clue where this amount is coming from

[VolvoGirl]

You pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C.  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.  

The SE tax will be included in your tax due or reduce your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  The SE tax is in addition to your regular income tax on the net profit.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 15 which flows to 1040 line 10.

[MAR96]

Okay i see how that number of about 2000 is calculated now. So i pay 15.5% the 92.35% profit twice basically? Any way to avoid that?

And can you explain the 50% ER portion? And how to find that in turbo tax

[MAR96]

@VolvoGirl sorry didnt tag you. But can you help with message above?

[VolvoGirl]

The deduction for 50% of SE tax is automatic.  Find it on 1040 Schedule 1 line 15 which flows to 1040 line 10.

Not following you about paying the 15% twice.  You pay the self employment tax on your Net Profit in addition to regular income tax on it.  2 different kinds of tax.  

[MAR96]

@VolvoGirl I just meant that i pay taxes on that income twice in 2 different forms

Im trying to find the ER credit portion as I dont think it was automatic. Im not sure how to look at the 1040 before filing. So im looking at last years form

[AliciaP1]

You can review your Form 1040 to see the line items referenced in the posts by following these steps:

1. Sign in to your TurboTax account
2. Open or continue your return
3. Select Tax Tools from the menu (if you don't see this, select the menu icon in the upper-left corner)
4. With the Tax Tools menu open, you can then:
   • Preview your entire return: Select Print Center and then Print, save or preview this year's return (you may be asked to register or pay first)
   • View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu

@MAR96