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To: GraceZ who wrote (161219)	10/30/2008 2:27:43 PM
From: neolib	Respond to of 306849

Hint: In the zero bracket the self employed person pays 100% of the 15.3% while someone in the 28% percent bracket pays only 73% of it even though in all cases 100% of the FICA payment is attributed to the FICA portion of federal receipts. You clearly don't understand what the SE computations do. They are pretty straightforward. Here are examples for two self employed individuals for : 1) Self employment of $3000. SE line 2: 3000 SE line 4: 0.9235 x 3000 = 2770.50 (This is "equivalent" income) SE line 5: 0.153 x 2770.50 = 423.89 (Total FICA) SE line 6: 0.5 x 423.89 = 211.94 (Employers half of FICA) 1040 line 27: 211.94 And of course this person will pay zero federal income tax so, as you note will pay 15.3% FICA on "equivalent" income as follows: 423.89/2770.50 = 0.153. Now lets look at one in the 28% bracket and see about your claim that they only pay 73%. 2) Self employment of 95,000. SE line 2: 95,000 SE line 4: 0.9235 x 95,000 = 87,732.50 SE line 5: 0.153 x 87,732.50 = 13,423.00 SE line 6: 0.5 x 13,423.00 = 6,711.54 1040 line 27: 6,711.54 For simplicity: 1040 line 22: 95,000 1040 line 36: 6,711.54 (this is the adjustment for 1/2 FICA) 1040 line 37/38: 88,288.46 1040 line 40: 5,350.00 1040 line 41/43: 82,938.46 (Taxable income and in 28% bracket!) 1040 line 44/57: 17,330 (Your total Federal Income Tax) 1040 line 58: 13,423.00 (Your total FICA Tax) 1040 line 63: 17,330 + 13,423 = 30,753 (Your total Tax) And what a shock, this person still paid 15.3% of their "equivalent" income in FICA tax: 13,423/88,288 = 0.153. Gee, who would have thought that? In both cases your "equivalent" self employment income is 0.9235 x your total self-employment income, and this step is PRUE AND SIMPLE A CORRECTION FOR THE EMPLOYERS HALF OF FICA AND THE FACT THAT THAT HALF IS BOTH FICA AND INCOME TAX EXEMPT! Once you do that step, your income is the same as an employed person, because you have subtracted 7.65%. Next up, 1040 line 22 DOES NOT HAVE THAT 7.65% SUBTRACTED, so this must be corrected on line 27. At that point, you income is now 0.9235 x the total income (it is now "equivalent" income) on both the SE and the 1040, JUST LIKE AN EMPLOYED PERSONS. If I've made a mistake in any of the above, I'd love to learn so, because I've paid 15.3% of my self employed "equivalent" income as FICA tax for years, and if your claim of 73% were correct, I'd love to know how I can get one heck of a refund by filing a whole bunch of amended returns (is there a time limit on how far back you can file amended returns, I'd need to go back 18 years). Unfortunately, as near as I can tell, your confusing is simply trying to reword things so that line 27 is a "real" deduction, rather than seeing the combination of the SE, & 1040 line 22 & 27 as a set of calculations which convert self-employed income into the same basis as employed income, so that half of FICA is treated as having no tax consequences. Why you can't see that is beyond me, but I have no further interest in trying to enlighten you on the subject. If I'm the one out to lunch, PLEASE do show me where I'm making an error, and my humble apologies in advance for currently thinking you are out to lunch instead.

To: GraceZ who wrote (161219)	10/31/2008 11:25:28 AM
From: GraceZ	Read Replies (2) \| Respond to of 306849

In 2004 FICA was 40% of all Federal taxes collected so 20% (your calculation) of 40% equals .8%. I guess the instant karma for giving someone else a hard time about math is to make an even bigger math blunder myself. I didn't give my post even another thought until I was laying in bed very late last night trying to fall asleep, after a terrible day of computer failures and impatient clients. Of course, it was then that I realized that I misplaced a decimal point on that .8%, it should have read 8%, which makes the share of total taxes paid for that bottom half closer to 12% not 5%.