Self-Employment Taxes for Dummy Freelancers

Schedule SE

You'd think that someone who collected at least a couple thousand bucks for pounding our "answers" at eHow.com would have a fairly good handle on the self-employment tax situation, You'd be wrong, though, at least based on the rampant cluelessness of freelancers writing about Taxes. That doesn't come as a surprise to staffers who've participated in online communities at freelancer sites like Demand Media and Epinions, where a lot of people seem every bit as ill-informed as eHowian Melly Parker. Parker's also responsible for stupidifying her readers on the topic in the PocketSense.com post, "How to Claim Self Employment"¹ [sic].

Parker's sins against the tax code begin in her opening paragraph where, instead of gently correcting the OQ about the misuse of the verb "to claim," she launches into a discussion of self-employment taxes:

"People who are self-employed must pay the full amount of their Medicare and Social Security contributions. Half the cost is covered by traditional employers."

You could say that. Then again, you could also phrase it correctly: "The self-employed pay their entire medicare and social security contributions; while half the contribution is covered by employers for traditional employees." Close enough for eHow, we guess. What transpires after that point is, to be blunt, rather stupid. Melly explains that first, you should,

"Write a letter or email to each client who pays you money asking that they submit a 1099-MISC form to you by January 31..."

Dumbass: they're required by law to submit a 1099-MISC if total compensation exceeds $600. Even so, it's up to the freelancer / contractor / gigger to report all income, regardless of whether it exceeds $600. Then, there's

"Read the Instructions for Schedule C to understand your deductions... They vary depending on the type of work you do and may include things like rent, gas or vehicle payments. Finish the form by giving vehicle information, calculating the cost of any goods you sold and listing other expenses."

First, gas is included in "vehicle payments" (unless the moron is talking about utilities). Second, the rules on claiming rent (and, for that matter, utilities) are pretty picky. Melly's treatment is quite bland.

Parker's ignorance is compounded in her penultimate paragraph², when she instructs the fools who think she's authoritative,

"Fill out the 1040 form using the information from the Schedule C to fill in the proper amounts... Fill out your total business income on Line 12, as calculated on your Schedule C. Fill out the rest of the form as you would if you were filing without being self-employed."

Parker, you ignorant twit, you forgot a couple of pretty darned important steps: In the "Adjustments to Income" section, self-employed persons can reduce their gross income on Line 27: Deductible Part of Self-Employment Tax,³ not to mention contributions to a self-employment retirement plan (Line 28), and the cost of health insurance paid by the self-employed Line 29). Melly also neglected to mention that the self-employed (or partially self-employed) must complete Schedule SE to calculate their self-employment tax, which they then enter on Line 57. Yes, bad tax instructions: small wonder we're giving the young lady a coveted Dumbass of the Day award. ¹ The original has been deleted by Leaf Group, but can still be accessed using the Wayback machine at archive.org. Its URL was   ehow.com/how_7626223_claim-self-employment.html ² the last 'graph is "sign and send." Dumbass. ³ these line numbers are from the 2017 Form 1040. Your mileage may vary.

copyright © 2018-2022 scmrak

SE - TAXES