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Self-Employment Tax is a Bitch

Last week I was lucky enough to finish up my taxes and sent them away to the US Treasury and the Franchise Tax Board of California. Last year was definitely the most I have ever made from affiliate marketing and I wanted to be a good citizen and pay my taxes. Since my total profits came out to be less than $10k, I thought I would pay very little. I mean, Obama is looking out for me, right?

Wrong

Self Employment screwed me. Many people that are making lots of money online incorporate or form an LLC to avoid these high taxes. In the future, if I start to make much more money, I will without a doubt incorporate.

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This entry was posted on Saturday, April 11th, 2009 at 10:12 am and is filed under My Life. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “Self-Employment Tax is a Bitch”

  1. Max says:
    April 13, 2009 at 5:06 pm

    I’d highly recommend incorporating. An S-Corp can shelter those profits from SE taxes and save you a cool 15%. You’ll still have to pay Federal taxes on your profits though.

    I’d suggest taking the next $2k you make and find a good attorney to set you up (an S-Corp should cost you about $1k) and then set up a meeting with a CPA to have your accounting done properly (a year’s worth of accounting would cost about $1k).

  2. Jason Pedersen says:
    April 13, 2009 at 6:54 pm

    Thanks for the tip Max. I will look into that.

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