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Subject:  Re: Self Employed FICA taxes/expense questions Date:  7/26/2005  2:00 PM
Author:  ptheland Number:  80107 of 132526

1) Do I need to report Per Diem ? Is it on 1099 ?

One way or another, yes. Either report it as income, or reduce your expenses by the amount reimbursed.

2) Can I take full deduction for unreimbursed expenses - travel, good, logdging, utilities, other ?

Yes. As long as they are ordinary and necessary for your work.

3) Do I pay 15.3% FICA on (Earnings - expenses) eventhough I've already paid Social Security on earnings as employee for half year.

Yes. Your total earnings subject to Social Security tax are limited to $90k this year. Your earnings as an employee will be considered when figuring how much of your self-employment income is subject to Social Security tax. For example, if you have $70k on a W-2 and earn $50k as a self-employed person, only $20k of your self-employment income is subject to Social Security taxes.

Remember that the Medicare portion (2.9% out of the 15.3%) goes on forever.

4) On a W2, does the employer pay 7.5 % on all earnings or they also have a max limit for Social security portion like the employee does ?

They have the same limit you do.

5) Is there any other way to reduce FICA taxes ?

Claim all of your allowable expenses.
Make less money.
Make so much money that the $90k limit just becomes noise in the overall picture.
If conditions warrant it, consider using an S Corp to shelter some of your income from FICA taxes.

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