turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

 
Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Best answer

Accepted Solutions

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

You need to pay the self employment tax in addition to any regular income tax on it.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit 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.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 27.   The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 4 line 57 which goes to 1040 line 14.  The SE tax is in addition to your regular income tax on the net profit.

View solution in original post

5 Replies

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

You need to pay the self employment tax in addition to any regular income tax on it.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit 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.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 27.   The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 4 line 57 which goes to 1040 line 14.  The SE tax is in addition to your regular income tax on the net profit.

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

When you are an employee your employer takes Social Security and Medicare taxes out of your paychecks.  When you are self employed you have to pay it in yourself on your profit.  

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

so how do I take 50% off the er portion? will it just allow me to edit that line before I file? what is er? thank you for your help i figured it was self emplyment tax related

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

ER = Employer.  Turbo Tax deducts that automatically.  

I am curious as to why my refund is $3000 less as a self employed small business owner as opposed to a w2 employee with the same income

got ya...thank you so much
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies