Category Archives: Taxes

Waiting to Pay Taxes?

The early bird gets the worm. I’m currently working on stuff for one of my classes that isn’t due until we have to be at class the week of the 16th. Granted, some of these things will take a lot of time, but I like to get it all out of the way so that I don’t have to worry about it later.

I’m the same way with taxes. As soon as I have everything I need, I like to get them all done and over with. Here are some times that you should… and shouldn’t… file early!

-          If you’re a college kid or the parent of a college kid: File early! Getting your FASFA done early is a good thing, because you can get scholarships and other grants that are on a first come, first serve basis.

-          When you have to pay taxes: Wait on it a bit. Just like if you’re getting money back, why should the government collect interest on your payment when you could be getting it in your bank account?

-          If you know that you’re getting money back: File early! Well, yeah! If you know that you’re going to get money back, you should file as quickly as you can! Why should the government get to collect interest on the money that they’ve already “borrowed” from you because you paid too much on your taxes?

-          When you itemize or may have to deal with other complicated circumstances: File early! With these kinds of things, the earlier you start the better. It prevents errors, you can see a professional if you need to, and you can take the time to double and triple check your work.

-          If you think you’ll just rush through them: Take your time! Don’t just get it done. Be diligent; make sure that you are including everything you are entitled to, and take your time.

-          When you think you’re going to forget: Just get them out of the way! This is why I file early. I know if I don’t do it immediately, I will totally and completely forget to do it at all.

-          When you are still waiting on your W2’s: Wait for them! Don’t ever use your last pay stub to do your taxes. Things can change in between your last pay stub and your W2, especially if your employer forgot to take things out or if they discover that they took too much out. Obviously, by now, you should have your W2′s, but the point remains. Wait till they’re in your hands.

-          When you know the post office will be a madhouse: The earlier the better! Yes, as it gets closer to April 15th, the post office becomes a crazy place. You don’t have to worry about this if you are filing electronically, but if you are planning to use the mail, make sure you do it sooner than later.

Are you done with your taxes? You only have a couple more weeks, but these guidelines can help you figure out the best time to do them next year! Have a great week, we’ll see you here next week!

Audit 101

S, you’ve been selected for an audit. That doesn’t mean that you’re going to jail, that doesn’t mean you’re going to necessarily have horrible credit or that the government is going to take all of your money away.  It doesn’t mean that the IRS thinks you deliberately cheated on your taxes; their computer system picked up the possibility for an error.

There are three different types of audits that the IRS currently conducts.

- Correspondence Audit. These audits are ones where you just have to send the IRS the documentation that they ask for.  Most audits come in this form.

- Field audit. If there is a need to look at your home or business in order to verify information on your taxes (for example, taking the tax breaks for making your home more energy efficient), then someone will come to your home and check it out.

- Office audit. An office audit is just like a correspondence audit, except that you actually have to go to the office and sit down with the IRS agent with the necessary documentation.

First, contact the IRS and let them know that you received their audit letter. It’s perfectly fine for you to ask why you were selected to be audited; most of them are found by a computer system, but there are other  reasons (relationships to other people who are being audited, different socioeconomic groups, and sometimes the IRS has projects of auditing groups that meet specific criteria). Ask how long you have and  Make sure that you find a qualified tax professional to help you out, it always works better if you’re getting the help of someone who knows the laws better than you do.

H&R block recommends that you keep the following for at least seven years, in case of an audit:

  • home mortgage statements
  • Forms W-2 and W-2G
  • Forms of the 1098 and 1099 series and Schedules K-1
  • receipts for employee business expenses
  • justification of fair market value for any items donated to charity
  • receipts for items donated to charity with value greater than $500
  • receipts for charitable contributions (including cash contributions made after 2006)
  • receipts for rental property income
  • brokerage statements
  • receipts for qualified education costs (this includes loan payments, etc).
  • 401(k) statements
  • IRA contribution records
  • receipts for items sold at a gain
  • home-office-related receipts
  • pay stubs
  • copy of the front and back of the check you used to pay your tax balance due, if applicable

(taken from http://www.hrblock.com/taxes/tax_tips/irs/being_audited.html#1)

Now, I know, a lot of you are probably sitting there thinking, “7 years?” I know, it seems like a lot. I only recently started, so I don’t have close to that. . But if you get audited, you don’t want to be found with your pants down. Organization is key. It’s better to be over prepared then not prepared at all. Be ready just in case, and if you ever do get called out for an audit, the situation will be much less stressful than necessary. Have a great week, and we’ll see you here next week!

Taxes for Temps

taxIt’s ski season, and a lot of people end up being seasonal or temporary employees during this time of year. I have several friends and acquaintances that work at the local ski resort. They sell snacks, teach classes, or run ski lifts. Summertime’s the same way; when I was growing up, I worked as an attendant at a pool. I sold snacks, cleaned toilets, and checked people in to the pool area. It wasn’t necessarily the best job, but hey, I got some cash in my pocket and in the bank!

It’s also tax season, and taxes as a seasonal or temporary employee can be very different depending on your circumstances. Some people who work for a period of time are considered seasonal employees; others are independent contractors. Both of these have different processes that they must go through while filing their taxes. This is important to know because you may have to calculate the taxes that are being taken out yourself.

Some jobs are classified as temporary jobs so that employers do not have to pay benefits. One of the most popular is waitressing.  Did you know that your tips are part of your taxable income? Because of this, it’s important to keep track of them. Larger companies and chains usually have some sort of system; mom-and-pop restaurants may not. If so, take the time every day to fill out some sort of ledger or spreadsheet to keep track of the tips you make.

There’s another thing that a lot of people may not realize when they work a temporary job: You may not have to file taxes. If you’re an independent contractor that makes less than $400, you don’t have to file. If you are actually employed and receive a W2, you are not required to file until you make at least $8,750. But, honestly, you should file, because you will probably get every penny of your federal taxes back. Throughout high school and college, this was the case for me. I did usually have to pay into my state taxes, but I almost always got all that I paid in back into my pocket during tax time.

Unfortunately, by doing this, I was giving the government an interest-free loan for a few hundred dollars. Had I filed differently, I would have gotten more of my money into my pocket throughout the whole year and not given the government that loan. No matter what kind of employee you are, temporary or full-time, make sure that you are filing correctly on your forms so that the government isn’t getting hundreds or even thousands of dollars from you as a loan for no good reason. That’s what bonds are for.

So, enjoy your temporary employment, whether you’re stocking shelves, taking on the slopes, or selling snacks at the snack bar. And don’t stress too much about those taxes; if you really need help, always consider going to a tax professional or company that can assist you. Have a great week, and we’ll see you here next week!

3 Sets of Silly Mistakes we Make with Taxes and Tax Returns

The last two years, I’ve been doing my taxes myself. This year will be no different. There are certainly risks in doing your own taxes, so if you don’t understand the laws, you should get someone to look at your return before sending it out.

When people are unsure and send anyway, they make some really big mistakes. Other people make mistakes when they get their returns. Here are three sets of silly mistakes that people sometimes make when doing their own taxes.

Three mistakes we make when we file.

1. Filing the wrong status. What matters? Your marital status as of December 31st. It doesn’t matter if you just got married on December 10th, if you’re married on December 31st, that’s your filing status. If you do this incorrectly, you risk losing child tax credits and other family-based deductions that you would otherwise have.

2. Not reporting certain incomes. Waitressing tips, casino winnings over $1000, and anything paid “under the table” or via freelancing needs to be reported and taxes paid on. The fines and fees for not doing this, no matter how small the error, are immense. Don’t risk it.

3. Social security numbers. I was in college twice. I know my social security number by heart. But, nowadays, this isn’t as commonplace as it used to be. Make sure that you write it neatly if you’re still doing your taxes by hand. If you aren’t 100% sure about your dependent’s social security number, ask them or find their card. It’s not worth the pain it is to refile.

Two silly things we do with our tax return

1. Spend instead of invest. Some people have a plan for their tax return, and that’s good, but you should also invest a bit of it as well. That money is money of yours that the government borrowed for the year, meaning that they got interest that you should have gotten. So, why not work to get some of that interest back?

2. Furthering debt instead of paying debt down. How is this possible? Well, some people use their return to make big purchases that they have to take out loans and/or use credit in order to make. Don’t do this! You should consider paying down your debt instead.

One thing we don’t do enough

1. Get organized beforehand. Too many people (myself included) wait until tax season to finally get all of their receipts and pay stubs together. Even if your system of organization involves throwing all of your stuff into a shoebox and dealing with it at the beginning of the year, that’s better than having to tear your house apart for that one medical receipt that you really want to claim.

So, avoid making these tax mistakes this coming year. Start throwing your stuff together for next year. Your plan for your tax return should include some investments. And most of all, check everything before you hit that submit button. Have a great week!

Tax Deductions for Being a Good Samaritan

Volunteer work is awesome. I never thought that I would enjoy volunteering as much as I do, but I do. Recently, someone I know informed me that you could deduct some of the funds that are involved in volunteerism and giving to charity.

I thought Angie was kidding, but she wasn’t! She then proceeded to tell me about the first year she saved all of her receipts from the stuff that she did and gave away. Now, I’m going to share it with you in hopes that you’ll be as enlightened as I was when she informed me of all this.

One of the things that both Angie and I want you to know is this: Don’t give because it gives you a good tax break. That’s never the right intention; sadly, some wealthy people and corporations use this strategy in order to get more and more tax breaks. It may be smart, but it also may weigh on your conscience.

Angie was involved in several different volunteer activities: She lead a small group of teenagers at her church, she chaperoned trips, gave students rides when they needed them. She tithed regularly, and she also gave larger sums of money to different organizations throughout the year. Every time that Angie donated money, she made sure to ask for a receipt.

Angie started to save her gas receipts, but only when she wasn’t reimbursed for driving. If you’re reimbursed, it’s not too fair (or legal) to ask to be reimbursed again (and that may be a premise for an audit later on, which would be more of a mess than it’s worth). She would get snacks and get supplies for her small group. And the receipts kept accumulating.

Angie also lost a significant amount of weight that year. So, she decided to donate some of her old clothes. The Salvation Army store helped her calculate an approximate value of her donation, and gave her a receipt for her donation so she could itemize that as well.

At the beginning of the next year, Angie sat down with all of the receipts and started calculating how much she may be able to deduct if she decided to itemize instead of taking the standard deduction ($5,700 at that point because Angie was single). It looked something similar to this (but not exactly; Angie couldn’t remember exact numbers in her head).

Gas costs (unreimbursed): $530
Supplies for small group: $102.54 (rounded up to $103)
Clothes Donation: $123
Tithe: $4,000
Donation to Organization A: $500
Donation to Organization B: $225
Donation to Organization C: $400

She told me her deduction was somewhere around $6000 if she itemized it. So, she took the time to do so, giving her an extra $300 worth of deductions for that year. She was excited, especially because she’d just gone into the next tax bracket. Angie shared that her return wasn’t that big that year, but had she not itemized, she may have even had to pay the IRS some taxes.

So, you can deduct a lot of your volunteer expenses and donations from your taxes. The IRS does it to encourage giving of time and treasures, but in this case, I think that everyone wins! Except maybe the IRS, since they had to pay Angie instead of her paying them.

The lesson? Don’t be afraid to see if you can deduct some things off of your taxes that you would do anyway. Don’t necessarily go out of your way to get a tax deduction via these means, but enjoy the experience and time as well.

Some Do’s and Don’ts for this Tax Season

It’s tax time! Exciting, right? Probably not, at least not until you get that return in the mail or via direct deposit (isn’t that the best thing ever?). But, there are some things that we don’t necessarily think through during our tax times. Today, we’re going to look at some do’s and don’ts to help you get through this tax season smoothly.

DO:

  • Pay attention to ALL of your income. Income isn’t only what you make in your paycheck. Did any of your accounts (except Roth IRA’s- they go tax free) accrue interest? Did you make any money on the stock market? Then wait to get your 1099’s from your financial institution. You have to claim any interest that you receive from investments.
  • Deduct non-cash charity donations. I know, it’s a pain. But, especially if you’re someone who gives a lot of clothes or food to charity, you should make sure to itemize them and deduct it.
  • Take that home office deduction. So many people get nervous about this because we’ve been warned it’s a red flag for an audit. But if you work from home at all and have a home office, deduct those supplies! You have a right to!
  • Check your math. Please. Most tax mistakes are because of one number being wrong. Don’t let that person be you.
  • Deduct medical expenses. So many people don’t realize that you can deduct your medical expenses if you itemize. If you have to pay for your health insurance yourself (with no help from your employer) and/or you paid a lot of out-of-pocket expenses because of a lack of coverage, then you can claim them.

DON’T:

  • Just take the standard deduction without calculating. Most of the do’s I mentioned involve itemizing. Most people want to avoid that because it’s “too much work.” But, a lot of software helps you determine whether to itemize or to just take the standard deduction. When I did my taxes a few weeks ago, the program I used had me calculate my itemized deductions (which included almost everything I listed in the Do’s section). It still ended up being less than the standard deduction for a single person ($5,700), but it was pretty close. Imagine if I hadn’t looked and it had been more! So many people overpay on their taxes because they’re too lazy to itemize- don’t let it be you.
  • Get a refund anticipation loan. These things are a waste of time and money. The interest rates are through the roof. With the IRS now offering direct deposit, you can get your refund quickly. I did my taxes in late January and got my refund last week.
  • Unnecessarily go to a professional. If your taxes are simple enough, you can spend the money on a software program and be done with it. Even if you itemize, these programs have become advanced enough that they can help you out. Professionals can cost almost as much as your return sometimes, where software programs are between $20 and $50. Now, if your taxes are complicated, going to a professional is not a bad idea.
  • Take a big refund without realizing why. You may be getting too much money withheld from your paycheck. Use available calculators to see how you should claim yourself according to your income and marital status and you can prevent getting more money taken out than necessary.
  • Miss the deadline. The most obvious don’t of all. April 18th. You can get huge fines and fees and being lazy or late is just not worth it.

This tax season doesn’t have to be as difficult as people make it. Be willing to put some time and energy into your taxes and your return can be maximized with little to no issue. Organization is key, and always seek out help (either online or from a professional) if you truly need it.

Defining some Tax Deductions

It’s income tax season again, and one of the biggest mistakes that many people make is missing deductions that could be making their refund check a lot bigger, or the amount they’re to pay in a  lot less. Many people just throw on what’s called the standard deduction: for most Americans this tax season, that amount is $5,700. This is the amount of income that you make that isn’t affected by taxation.

Did you know in some cases, you may be missing out on a lot by just taking this instead of itemizing? Last year, it was estimated that there were over one trillion dollars in missed or overlooked deductions. That’s a lot of money! When you itemize, you take each individual deduction, add them all up, and deduct that from your income instead. Here is an inconclusive list of things you may be able to deduct on your taxes:

  • Interest on student loans – your loan company should provide you with the documentation necessary to claim this deduction.
  • Dependent children and dependent parents that you care for. They don’t have to live with you to count, as long as you provide 50% or more of their living expenses and they don’t claim themselves, you can claim them.
  • Energy efficient home renovations and vehicles. Energy efficiency is encouraged, and these deductions prove it.
  • Home office and computer supplies if you have a home office. But you need to be the only one using these things if you claim them.
  • Moving expenses for starting a business or relocating for a new job. Keep those receipts!
  • Health care premiums. Especially for the self-employed or those who own their own business. This is a huge help.
  • Charitable donations, gifts, and supplies/gas for volunteer work. People don’t realize that they can deduct these if it’s to a non-profit organization with the right paperwork.
  • Teacher school supplies- Up to $250
  • Child care- To encourage parents to work, especially because this can be expensive.
  • Lifetime learning credits- If you go back to school as an adult and pay tuition out of pocket, you may be able to qualify for these.

Many times, in order to avoid an audit or to verify the amounts you itemize, you will need sufficient documentation (receipts, inspections to see if what you’re claiming applies for the deduction you’re filing for, etc.) If you think that your deduction is going to be more than $5,700, then it’s wise to itemize. The IRS isn’t allowing itemizers to file until February 14th of this year (because of the Tax Relief act passed at the end of 2010), but the wait may be worth it.

If you need help or think that you may miss something in the process of preparing your tax return, never be afraid to spend the money to go see a tax professional. They’re there to help you get the most for your money. Make sure that you don’t miss out on the money that you deserve this tax season!

Issue with filing my Taxes

Last year, taxes were a headache. It was the first time that I’d ever tried to do them on my own. Needless to say, that really wasn’t that big of a deal. It was as easy as plugging a few numbers into where I was told to (my taxes weren’t overly complicated last year, I was a graduate student with an on-campus job). Months earlier, we’d decided on me finally filing as independent: I paid for almost all of my needs, and I was 25 years old.

Turns out my step dad didn’t hear about this agreement. My mom was ill last year, and so he was in charge of doing their taxes… and accidentally listed me as a dependent. It wasn’t his fault; Mom hadn’t told him, I didn’t think so, but this started a complicated process that I will thankfully never have to go through again.

My return got shot back to me. “There are mistakes on your tax return,” the email said. How could I have made a mistake when my return had been so simple? So, I went back through it, double checked some things, and sent it right back. Once again, the tax return bounced right back. I called my step dad, wondering what in the world was going on.

“Not sure.” He said. “I claimed you on your mother’s form…”

I groaned. That was the issue. I had been trying to file myself as an independent taxpayer, whereas the filing service noticed that I’d already been claimed as a dependent by my mom. This lead into a 10 minute conversation with my step dad about what exactly we were supposed to do about this. We talked to a friend that knew about taxes, and they said we had two options.

-          Just to file myself as a dependent for one more year and make sure that the following year the same mistake doesn’t happen again.

-          Go through this big long process to redo my mom’s taxes then redo mine.

Honestly, it wasn’t worth the hassle to do the second one. My step dad paid me the part of what I didn’t get because of his mistake. But that goes to show you: make sure you talk to everyone that may be involved in your tax process. Or it could end up being a huge headache.

What determines whether you’re a dependent or independent?

-          Dependents have half of their living expenses paid by the person they’re a dependent to.  When this all happened, I was kind of on the line (at about 48%). So we were fine making the case that I was still a dependent.

-          You are 24 or younger, disabled, or a parent being taken care of by a child. (I was 24 for the tax season in question, just 25 when this all happened).

This year, I don’t qualify for that in any sense, so it’s not a question. But make sure, before you automatically list one or the other, that you fit the criteria… and that other people involved aren’t claiming you. Rough lesson learned, but at least it was learned.

Simplifying Social Security

Do you ever look at your paycheck? Statistics say that not a lot of Americans do in detail. Most people just look at the dollar amount and put it in the bank or cash it (or, because more and more of us receive Direct Deposit, just look at the amount and toss it aside). If you ever were, there are some interesting things being taken out. Have you ever wondered what that $15 that is taken out for Social Security is actually used for? I did, and now I’m going to share with you how the whole thing works.

Social Security was put into place by Franklin Roosevelt as part of the New Deal in 1935. The elderly and disabled had been taken care of by their families financially until this was put into place. Roosevelt made it clear that he wanted people to be taken care monetarily of during times of their lives that could be otherwise stressful (old age, becoming disabled, losing a spouse or parent).

The numbers I’m using are prior to the Social Security Cut that President Obama is initiating in 2011, which I’ll talk about at the end of this article. Basically, for every dollar you paid in Social Security (until 2011)…

-          69 cents goes to a trust fund for retirees and their families

-          19 cents goes to a trust fund for Medicare

-          12 cents goes to a trust fund for people with disabilities.

Only about a penny of every dollar is for administrative costs. But, the government can dip into those trusts and borrow money in order to pay the above benefits, especially when those benefits cost more than what is projected. In summer of 2010, Social Security said that it had a $2.5 trillion dollar trust fund (truth was, the government just owes Social Security a lot of money).

Here’s a breakdown of how Social Security Benefits work:

In short, the number of years that you work give you what are called “credits.” As of 2011, you get one credit for every $1,120 you make, and you can get up to 4 credits a year.

For retired persons: The “normal retirement age” varies by your birth year. If you were born before 1938, normal retirement is 65. It increases in 2 month increments until those who were born in 1943, where it changes to 66 and stays there until the birth year of 1955. If you were born in 1960 or later, retirement age now changes to 67.  You can get reduced benefits at age 62. You can also delay retirement until age 70 and get increased benefits. In order to get retirement benefits, you need the equivalent of 10 years of work (40 credits).
For disabled persons:
Long story short, filing for disability is difficult. The severity of the disability, whether it’s temporary or permanent, and how long you get benefits for is based upon applications and physicals. These following numbers are if you become disabled as an adult (different rules apply if you were born disabled):

-If you are 24 or younger, you need 1 ½ years of work (6 credits).
-If you are 24-30 you need credits for half the time between age 21 and when you were disabled. (If you’re 26, you need 2.5 years or 10 credits)
- 31 or older, you need at least 20 credits in 10 years immediately before you became disabled. The Social Security Administration has a table on this at http://ssa.gov/pubs/10072.html.

For widows/widowers and their children: Called “survivor’s benefits, they are as follows:

  • Widow/widower- full benefits at retirement age, reduced at age 60, if they’re disabled it can be as early as 50, and at any age if they’re taking care of a child that’s 16 or under or disabled.
  • Divorced spouses (this is a big, long, complicated thing that I won’t get into here)
  • Unmarried children under 18 unless they’re still in high school until age 19. Stepchildren, grandchildren, and adopted children may be included in some cases.
  • Dependent parents over age 62.

As with everything, there are exceptions and most times it’s best to get a lawyer if you are in a unique situation.

There has been a lot of concern about Social Security, which has lead into debates about privatization and reform that I won’t get into in this article. It has been estimated that many of today’s workers won’t be able to get Social Security because the program is simply going to run out of money. President Obama and Congress have recently implemented a tax cut that furthers this concern; the Social Security tax will be cut by approximately 1/3. That’s a lot, especially for a program that is suffering. What does this mean for the future of Social Security? No one really knows, but I think everyone agrees that reform needs to happen or the program will go belly up.

2010 Income Tax Brackets

Here are the marginal tax brackets for 2010. Keep in mind that these rates only apply to taxable income. After various adjustments and deductions are calculated, whether you decided to go with standard or itemized deduction, then you can see where you stand within these following brackets. Also keep in mind that aside from federal income tax, there’s also State tax. Usually your state tax + local county tax is around ~5% but you’ll have to check your state for more accurate details.

Please note that these tax brackets are provided for planning purposes. To get a more accurate result, please visit the IRS website and see the office instructions for Form 1040, 1040A, or 1040EZ as appropriate.

Married Individuals Filing Joint Returns and Surviving Spouses (Table1 – Section1(a))
Taxable income is between:
$0 to 16,750 = 10% of taxable income
$16,750 to $68,000 = 15%(of excess over $16,750) + $1,675
$68,000 to $137,300 = 25%(of excess over $68,000) + $9,362.50
$137,300 to $209,250 = 28% (of excess over $137,300) + $26,687.50
$209,250 to $373,650 = 33% (of excess over $209,250) + 43,833.50
$373,650 and up = 35% (of excess over $373,650) + $101,085.50

Head of Households (Table2 – Section1(b))

$0 to $11,950 = 10% of taxable income
$11,950 to $45,550 = 15%(of excess over 11,950) + $1,195
$45,550 to $117,650 = 25%(of excess over $45,550) + $6,235
$117,650 to $190,550 = 28%(of excess over $117,650) + $24,260
$190,550 to $373,650 = 33%(of excess over $190,550) + $44,672
$373,650 and up = 35%(of excess over $373,650) + $105,095

Unmarried Individuals (Table3 – Section1(c))
$0 to $8,375 = 10% of taxable income
$8,375 to $34,000 = 15%(of excess over $8,375) + $837.50
$34,000 to $82,400 = 25%(of excess over $34,000) + $4,681.25
$82,400 to $171,850 = 28%(of excess over $82,400) + $16,781.25
$171,850 to $373,650 = 33%(of excess over $171,850) + $41,827.25
$373,650 and up = 35%(of excess over $373,650) + $108,421.25

Married Individuals Filing Separate Returns (Table4 Section1(d))
$0 to $8,375 = 10% of taxable income
$8,375 to $34,000 = 15%(of excess over $8,375) + $837.50
$34,000 – $68,650 = 25%(of excess over $34,000) + $4,681.25
$68,650 to $104,625 = 28%(of excess over $68,650) + $13,343.75
$104,625 to $186,825 = 33%(of excess over $104,625) + $23,416.75
$186,825 and up = 35%(of excess over $186,825) + $50,542.75

For more in-depth details, you can check out the 2010 Tax Table at http://www.irs.gov/pub/irs-pdf/i1040tt.pdf

Please look over these tax rates so that you can plan accordingly and know what to expect if you owe or you are entitled to receive a refund.

Also I’ve posted additional tax information regarding Social Security and Medicare taxes below.

Social Security tax:
6.2% on earnings up to $106,800 for employees/employers(each)
12.4% on earnings up to $106,800 for self employed

*In 2011 Social Security Tax will get a 2 points reduction bringing it from 6.2% to 4.2% which would let workers keep as much as $2,136*

Medicare Taxes:
1.45% on earnings up to $106,800 for employees/employers(each)
2.9% on earnings up to $106,800 for self employed