Seanan McGuire (seanan_mcguire) wrote,
Seanan McGuire
seanan_mcguire

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Dear Uncle Sam: I hate you, too.

So here's the basic thing: I grew up below the United States poverty line. Way, way below the poverty line. "I really thought yellow boxes meant it was food" and "let's have government cheese sandwiches" levels of below the poverty line. One thing you don't get when you're below the poverty line in America? Dental care. Combine this with a dental phobia (brought on by the rare occasions when I actually saw a dentist, as the dentists assigned the charity cases were often shouty) and an adulthood spent largely temping, and, well. Nothing good can come of this.

Because I am a working author with a day job and good dental insurance for the first time in my adult life, I thought "hey, I'm finally in the position to actually pay to have all the necessary work done." Not "the cosmetic work." The "chewing is fun and awesome and I enjoy being able to do it" work. I found a dentist, I organized my finances as responsibly as I could so that I would be able to pay for everything...

...I got slapped upside the head with self-employment taxes, which, as anyone who's ever looked at the forms can tell you, is obscene. They don't adjust for your situation, either. There's no box to check for "I need lots of medical work, I am employed by a non-profit, and I live in one of the highest cost-of-living regions of the country, so please, don't assume I can afford what you're asking me for." If you make ten dollars income that can be hit with the self-employment taxes, the government wants between three and five dollars of that, even if you're not going to get any more money that year.

Why am I bitching about this now? Because I finally got my full estimate for the rest of my dental work. And that, combined with my final quarterly tax payment for the 2009 tax year, will basically kill my savings account, which I have worked so very hard to build. A lot of my expenses for the year have been deductible—including a lot of my medical, given the level of extensive that it's achieved—but the bills still have to be paid now. If it weren't for the sheer scope of the taxes I've had to pay this year, I'd be fine. Instead? I'm crazy irritated.

Screw you, too, Uncle Sam.
Tags: cranky blonde is cranky, medical fu, state of the blonde
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  • 44 comments
What the freak is with 30-50% taxes for the self-employed? Incredibly stupid and I'll join you in raising a mob to storm D.C. and yell angry things while brandishing torches and pitchforks.
Sadly, I know where the numbers come from. It's because self-employeds pay both halves of Medicare and Social Security taxes, for starters. *sighs*

jenk

7 years ago

. . . that is both nauseating and infuriating.

Taxes in this country are insane, given how little we get for them. I'd actually cheerfully pay more if health and dental and decent schooling and proper vacations were built in, but as it is, I am BITTER.

And you have more reason to be!
I hear you. We have to cash the IRA to even have heat this winter because the State folks who are supposed to help with this kind of thing won't until we pay off the turned-off gas account. :p I'm actually praying nothing happens to my teeth because my dental plan is...very iffy. (Aetna = POS plan)

On the bright side, once the IRA is gone we'll get a huge help with weatherizing the house.
You might want to consider incorporating. Shoot me an email or message if you want to know more.
You may need to adjust your withholding on the day job. And Self-employment tax is only on what is left AFTER expenses for the side game. So gang up those expenses on the writing side. You can deduct conventions. Just saying.
The number of things that are deductible in even the most basic self-employment situations is one of the reasons why we need to burn down the entire system and start over. Although in this case it's a benefit to some of us. But really, the difference between an honest novice and a professional that squeezes the forms a bit can end up being 10% or more of your gross income. Last year I had my dad help me with the forms, because my brain exploded, and it went from "OMG that's a huge payment" to "Ooooh, rebate!". And I was doing the whole thing *with* the latest computer assistance.

None of which helps with the immediate question of "how do I pay bills?", because while Uncle Sam might demand quarterly estimates and payments from those of us without standard withholdings, god forbid he give us quarterly estimated rebates, even if we really deserve them.
Oh geeze! I got hit by that 6 or 7 years ago when I worked as a consultant for the company the let me go in 2001 (and again this year). For about $10k in income we had to pay about $6k in taxes the next year.

So any self-made income I get these days (nothing at the moment) gets 50% taken out and put in savings to pay the taxes when April rolls around.

I dearly hope somebody in the gooberment eventually does something about this but that may just be the cold medicine tweaking my sanity.
Ouch. I'm going to comment from a post Mike Resnick made recently in his newsgroup, and maybe this can help you down the road.

"Incorporate. Not to protect against lawsuits -- tho as a
non-fiction writer that's a consideration -- but for
economic reasons. If you buy a car, it's not deductable
or depreciable; if your Subchapter S corporation does, it
is. If you buy health insurance, it's not deductable; if
your corporation buys it for its only employee (you), it
is. And so on.

The main thing is this. Let's say you earn $70,000 writing
next year. As a private individual, you have to pay a
self-employment tax (which exactly equals FICA and Medicare)
of 15%, or $10,500.

But if your corporation puts you on a $10,000 annual salary,
the FICA and Medicare payment will be $1,500, a tidy savings
of $9,000.

You will pay -income- tax on your profit either way...but,
again to simplify, let's say it's all profit. The corporation
will pay you a -dividend- of $60,000, and you'll pay income
tax on it...but you won't pay FICA and Medicare because it's
not salary.

Now, donating that much less to FICA can come back and
bite you in the ass when you turn 65 (or 70, as it figures
to be in a few years), but a) you probably need the money
more now, b) who knows how long you're going to live, and
c) what writer every quite just because he reached retirement
age? In fact, what writer ever quit, period?"
Check with a tax professional before you pull a stunt like this. S Corps are required by law to pay appropriate salaries to their owner/employees specifically to prevent this kind of fraud. You can become liable for extensive penalties and interest that will make your tax rate look puny.

The tax rate on your self employment earnings is only 7.65% more than if you earned it at your day job. Frankly it seems like your whining about paying any taxes at all, which we all can sympathize with.

seanan_mcguire

7 years ago

adb_foldem

7 years ago

when I was thinking about setting myself up as a self-employed costumer, I was shocked at how much more I'd be paying in taxes. I expected to get hit a *little* harder for Social Security, but not THAT much.

For a country that supposedly prides itself on self-made-men (er, people), the tax infrastructure certainly suggests otherwise.

*sympathy*
The myth of self made men/woman is a boot-strapper myth and has been for a couple of hundred years.
Ouch.
Dental care can be expensive here for adults but at least all children under 16 get it free.
That 's awful. We no longer have free dental care here either, but it's not as bad as the US. Come live in the UK: it's the only solution!
It's only a guess, but I think Seanan would look at Australia first.

How's your supply of poisonous wildlife?

la_marquise_de_

7 years ago

This is where I worship at the feet of the deity that decided to give me teeth that are apparently immune to cavities despite periodic lapses in professional care (I just didn't bother when I was out-of-town for school, because I didn't want to hassle trying to find a dentist that wasn't a nightmare, and then insurance ran out when I hit 25 and fell off the bottom of my parents' plan).

And I wince in sympathy. Either one of dentistry and self-employment taxes is bad. Together at once? *shudder*
Seanen. even if you only make $10,000 a year selling books, get a professional book-keeper and incorporate. The tax structure is set up to protect corparations and squeeze the little guy. So, the only solution is to be the little guy who has incorporated and hired a competent book-keeper. Your agent should know several someones who are able to handle your paperwork.
Um, actually, agents (including myself) probably don't know bookkeepers other than our own. One of those many many myths about what an agent is responsible for. We aren't accountants, and we don't pretend to be. To get accounting and bookkeeping advice, hire an accountant. We do.

bearhand

7 years ago

:: sending sympathy and some empathy ::
Interestingly enough I had this conversation today with a woman I know who is self-employed in the music industry. And this is what I learned every self-employed person should do no matter how much they make: get an accountant. Get an accountant who knows what they're working with; being an author, in your situation. Their whole job is to figure out every roundabout and loophole to give you the lowest bottom line they can find and a trusted accountant will more than pay for themselves over time (even if it's just by saving you headaches and unpleasant surprises).
Brilliant post. Years ago when my brother started his dental practice, he asked if I'd become his book-keeper. I told him to find an accountant that was familar with the industry and he asked me who to hire. I told him to call and ask some of the established dentist who they used and would they recommend them. That's how he found his accountant and he told me that was some of the best advice that he'd ever received.
That's a brilliant post (and a ridiculous situation).

Deleted comment

I'm really sorry to hear that. The self-employment taxes are some of the most confusing and lop-sided I've ever seen.
A small idea . . .

You're in the habit of giving away content. Songs, poems, the "Velveteen vs." stories, even your general LJ posts, all provide entertainment to your friends and fans.

Which is a long-winded way of pointing out that you, in particular, would be thoroughly justified in putting a tip jar on your web site.
I second this suggestion.

keristor

7 years ago

natf

7 years ago

Definitely think about incorporating. The tax benefits are worth thinking about.
Health insurance *is* deductible, as an individual, but if your medical expenses aren't above 7.5% of your AGI, you don't get the credit. You really only get the benefit if you've had nasty nasty medical expenses.
When health insurance is paid by the corporation, it's an ordinary business expense.

Do get *QUALIFIED* and *COMPETENT* advice. If I recall correctly, Janis Ian had a post on her web page regarding accounting troubles with a business manager. If you fall into the trap of "Oh, my accountant/agent/business manager handles that", you end up with tax problems like Willie Nelson & Wesley Snipes.

Good luck! Just remember, Nevada, Texas & Florida have 0 state income tax. I'm just saying....

...but Texas does have heavy property taxes. We live in a modest house in a sketchy neighborhood and paid about $4,000 in property tax last year.
Wow.
U.S. self-employment taxes sound rather a lot like Canadian income taxes. Except minus the tax-funded health-care benefits (alas, NOT including dental) that come with it.
:-P

I hear Victoria's lovely. Wanna live on an island? ;-)
That totally sucks. I'm pretty sure there's a low income threshold for self-employed people in Australia, or something like that. At least, I hope there is. Next financial year, God help us all, I'm actually going to have to fill out a BAS statement as well as a normal tax return. AGGH.
I told my husband (who was an independent consultant for a bit, and after the tax nightmare, is VERY leery of ever doing so again) and my mother (since my stepfather owns his own businesses) the monster under your bed is self-employment taxes thing, and they definitely agree.
Ask Carol Burnett (or read her book) about dental care when you're a child living below the poverty line. The one experience she's willing to talk about? Seven fillings without novocaine, one sitting. She refers to having a near phobia about not brushing her teeth faithfully, attributable to this. (...you provoke the strangest pulls on my memory banks, hon....)

We may have been four kids with a single Mom who worked nights, but Mom had gone through her life without proper vision OR dental care, and woe if that was going to happen on her watch.

Mom turned into the biggest wheeler-dealer and negotiator when it came to medical care I ever saw. That's what friends and coworkers were for! (And the fact she was always considerate, grateful and never wasted a thing didn't hurt, either.)

My dental care was provided by a dentist who kept Arabian horses on the same property as his dental offices. Yes, I went out and petted ponies while I waited my turn for fillings and the like.

I've bought dental insurance as presents - my privilege is aghast to see people going without.

(And I understand Delaware is the state to incorporate in. Ask that wonderful accountant.)
Your taxes in the US are insanely complicated compared to ours and yet, I have an accountant. Trust me, an accountant who understands what it is to be self-employed (and be careful here because not all of them do) will save you significantly more money than you will spend on them AND will advocate for if the government objects. You can save money (and make sure you don't lose control of the situation a'la Willie Nelson) by doing your own book keeping (maintaining receipts you can present if necessary) and having them then apply it to all the complexities of government pick pocketing.

I have a specific "tax account" at the bank and between one quarter to one half of EVERY payment I get (depending on the year I'm having, you'll get the feel for that after a while) goes into it.

But yeah, it kind of sucks. Especially since you see less bang for your tax buck than we do up here.
Oh, I have an accountant, and she's wonderful. This is actually why my tax liability was so low.

It makes my brain hurt real bad.

andpuff

7 years ago

We are trying to track down a copy of R&R in the UK but had no luck this afternoon in Crawley. We will persevere. I also cannot wait for your / Mira's "Feed". Hopefully the more books that are bought the more likely your dental work will be. *hugs*
My dental work is definitely happening. It's all the rest of my bills that are suddenly in question. :)