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The Bigger Picture

As this tax season comes to a close, some of the questions that I hear is, "why do I owe and how can I avoid owing?" This is something that I hear often from clients at tax time. First, there is a way to reduce what you owe when you file, it requires that taxes be paid throughout the year.

There are 2 ways to do this, it is through withholding or paying estimated taxes, quarterly.

If you are an employee, withholding taxes are withheld by the employer and paid on your behalf. Employees and employers split the social security(6.2%) and medicare(1.45%) tax rate in half, however sole proprietors pay the whole portion of the medicare and social security taxes.

Tax Rate for Social Security is 12.4% and 2.9% for Medicare

Sole proprietors, independent contractors, partners in a partnership, and members of a multi-member LLC ( with a partnership election for tax purposes) with earnings of $400 or more are subject to self employment tax.

Estimated taxes cover income tax, self employment tax and the alternative minimum tax.

Estimated tax rate for NYS are 10%, 12% , 22%, 24%, 32%, 35%, 37% which is based on your expected income and profits that are subject to self employment tax minus expected deductions.

For help calculating estimated tax payments for NYS and Federal, contact me for a consultation, or refer to the IRS.Gov or tax.ny.gov websites for forms and current rates

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