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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Independent Contractor status/taxes Date: 1/1/2002 7:25 PM
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I haven't checked your computations, but it appears as if you're handling everything correctly.

The extra tax $405.17 represents both halves of the FICA and Medicare tax that would be paid if you were an employee. You get to deduct the "employer" portion on the front of Form 1040 as an adjustment to your income. As a result, the true tax rate on the moonlighting money isn't significantly different from what it would be if it were salary. In other words, your net earnings after taxes are the same. What appears different is that the $405.17 is on your Form 1040 and not on a W-2. Most people "forget" about the portion of their taxes which are withheld for FICA/Medicare. Self-employed individuals don't have that "luxury."

As to the deductibility of your medical license fee -- if it is an annual fee for the right to practice medicine, it is deductible, but the fee should be allocated between unreimbursed employee expense and self-employed business expense on the basis of the relative contributions to your income. Since you don't itemize, the employee expense portion is included as part of your standard deduction. If the license is for more than one year, you will have to amortize the cost over the life of the license.

Ira
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