Keep this quiet: Year 2002 Social Security Tax Hike (my title)

Company Payroll Dept. | 01/03/02 | Corporate

[lds23]

The Social Security Administration (SSA) has announced that the 2002 social security wage base will be $84,900, an increase of $4,500 from the 2001 wage base of $80,400. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore, all covered wages are still subject to the 1.45% tax. The FICA tax rate, which is the combined social security tax rate of 6.2% and Medicare tax rate of 1.45%, remains at 7.65% for 2002.

The maximum social security tax employees and employers will each pay in 2002 is $5,263.80. This is an increase of $279 from the 2001 maximum of $4,984.80.

[coder2]

Self-employed people can incorporate and pay themselves a reasonable fixed salary, with the remainder of their business income distributed as profits, not subject to employment tax.

Correct, in theory, but not necessarily true... For example, let's say you thing $50K is a reasonable salary, but after expenses, you still manage $50K in profits... for a total of $100K income... Do that a few years in a row, and I guarantee someone will be getting a visit.

No way are they going to let someone get away with that for very long...

[Tuscaloosa Goldfinch]

That's why self-employed people should INCORPORATE (excuse the shouting) and take a minimal salary and then the rest in income distribution. 15.75% of $84K is more than 13 thousand dollars. And that's BEFORE income tax.

Still kicking ourselves for not doing it thousands and thousands of dollars sooner.

[is_is]

As in most cases with tax law, there are ways for small business owners to avoid paying most of these taxes while still obeying the law to the letter.

Want to bet??? I am a small buisness owner and there are few loop holes and NONE that i am aware of that will elliminate "most of these taxes" as you say....

[is_is]

That's why self-employed people should INCORPORATE (excuse the shouting) and take a minimal salary and then the rest in income distribution. 15.75% of $84K is more than 13 thousand dollars. And that's BEFORE income tax.

First...any profits left in the corporation are taxed at the applicable rate.....then when distributed to share holders or owner he/ they pay personal income tax on the dividend/distribution....I go over this with my accountant every year....it does not work the way your proposing.....the gov has you coming and going. I will agree that incorporation is the best way, but it does not cure all.

[TheRightGuy]

with the remainder of their business income distributed as profits, not subject to employment tax.

These "distributed profits" are, indeed, treated as dividends. While they may be exempt from "employment taxes", they are considered taxable income both to the corporation and to the recipient -- a double whammy to the owner of a small business.

[3catsanadog]

Isn't it sad that quite often we Americans feel forced to rearrange our lives (sometimes yearly) to try to outwit our national tax situation. No wonder so many working people are taking Paxil/Prozac.

[SteamshipTime]

You replied! (Gasp, choke, turning purple...)

I must say though, I was not interested in what you think about the politics of Social Security, but what you think about the economics of Social Security.

[Libertarianize the GOP]

Bump to the Social Security list.

[SteamshipTime]

Me: In his defense though, he probably figures that he has no choice, given the electorate's belief that they can live off everybody else.

Thee: IOW, GWB is a good liar, but he's our liar so we are obligated to love the lying SOB.

Me again: In this regard, is he any different from the Democrats? You would agree with me that both parties are co-conspirators in this confidence game?

[Tymesup]

Americans revolted against England when the tax rate reached 10%. People now pay 50% without batting an eye.

[goodnesswins]

Thanks....but, I always thought staying home kept Mom's or others who choose not to participate in the "official" workforce (like me) DID NOT get penalized, because working caused us to pay more in INCOME taxes...didn't realize the effect on SS, and not sure I understand.

[willyone]

At the present time there are around 700,000 aliens who have never paid a cent into the system drawing SSI and other benefits such as Medicare etc. I am sure this also doe's wonders for the solvency of the system. There is no way that the society we have all come to be used to can survive the massive insults inflicted on it by our politicians. Runaway immigration, a huge trade imbalance and the Social security fiasco will soon put the nails in the coffin of a once great nation.

[willyone]

The early users of SS are making out. In a few years that will change as the only way to continue paying benefits will either involve taking almost all the pay of younger workers, using general revenues or drastic reduction of benefits. You need to learn how to do some basic logical thinking. Whoops, you are a liberal so most of your brain doe's not function. Two workers for each retiree cannot generate enough income to pay benefits.

[rollin]

When a competent business person hires an employee, the cost of hiring that employee is considered and that includes actual wage cost, employee tax, employer share of the FICA tax, SUTA tax, and benefit costs such as group health insurance, pension benefits, free parking, etc.

To do otherwise would be irresponsible and fooling yourself. That is a quick way to failure!

[PatrioticAmerican]

SSI is a Ponzi scheme at it worst.

[Castlebar]

I am personally paying $900 less in income taxes this year because 7 US Supreme Court Justices blocked the attempt of four criminals on the Florida Supreme Court to steal the election for Al Gore. Thats $900 less for the government and more for me. And that's the WRONG direction?

[poet]

How else are the scumbags going to get their $4,900 increase that they put thru w/o fanfare while the SS recipients receive $37.00 on average.
When are Americans going to hold these sobs accountable?

[Dianna]

Persons who die before starting to receive SS are the only signigicant group of losers in the SS system. Republican Party sponsored bad mouthing of SS just doesn't have any basis in fact. None!

ROFL!!!!! Let's carry your line of thinking to the obvious conclusion, my dear. If all payers into Social Security get WAY more than they paid in it will.....

What??

What will happen?

It'll GO BROKE! THAT is the problem. And, of course, the fact that I can do better financially by investing that money for myself.

[Tuscaloosa Goldfinch]

We are sub s. We save on social security taxes, not income taxes. There are several other ways that incorporating has saved us $$, that I won't go into here.

[Alberta's Child]

Here's a start:

Let's say you earn $72,000 per year as a self-employed small business owner. There's no reason why you can't convert your business from a sole proprietorship to a corporation, pay yourself $1,000 per month in salary, then distribute the remaining $60,000 to yourself in the form of dividends.

Dividends are subject to income taxes at your applicable tax rate, but they are not subject to payroll taxes.

If you Freep-mail me and let me know what kind of business you are in, I may be able to offer a few more general tips.