New LLC Question
Good afternoon,
I am about to create an LLC and start contract work for a company. I was looking to charge $55/hour (consulting) but I realized that under an LLC I would be subject to additional employment tax of 15.2% on top of the income tax for my state (Ohio) and federal taxes. I expect when all is said and done I'm going to work an average of 20 hours/week for maybe half a year (20hrs x $55 x 26 weeks= an estimate of maybe $28.6K for the year, potentially more).
I just want to make sure I'm not missing anything on this new LLC: after my work, I'll bill the customer for my rate and hours and then from my side I'm going to calculate that amount * 15.2% and with the remaining balance I should multiply the federal and state taxes? Or is there a basic % someone would recommend I should just hold onto?
Thanks
Posted by BostonInformer
2 Comments
The 15.2% self-employment tax has nothing to do with an LLC.
You need to familiarize yourself with the Schedule C. Here are the instructions:
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Most tax software will calculate your self-employment tax for you once you complete the schedule C.
1. An LLC is for the millionth time is something you form for legal protection it changes nothing for your personal tax situation
2. My opinion is you are not in business but some job offer you saw is illegally attempting to evade the payroll tax rules and told you that you needed to form an LLC to get “employed” by them
How is what you are doing not any different than what an employee would be doing for them?
A business doesn’t have just one client, they have a business with many clients
I have seen this too many times to count and could be wrong but doubt I am and as an employee you would pay 7.65%, be eligible for unemployment, covered by their insurance and also for workers comp and disability
But to answer your question yes you pay self employment tax on top of all regular income taxes