Posted by Art_PA on 8/26/11 1:46pm
Msg #395154

Tax Issues - Waiting for Irene

If substantial income is from notary fees, as distinguished from signings, keeping records of such to document how you pay self employment tax, you may save something now, while reducing your Social Security later.

As mentioned in my usual end of year post, when I think of it, you can save substantial tax by opening a solo or self-employed 401(k) now. You will be able to shelter a lot of income, thereby paying much less income tax, assuming you have cash to fund an account. To shelter $10,000 of income you have to put it in an account which you cannot access until reach 59 1/2, w/o penalty.

You can also use a SEP IRA.

If you spend everything you earn, you can't save what you don't have, so it makes sense to set up something and put something in the account so you can save for the future, and pay less in taxes now.

It makes sense to look into retirement account options now as the 401(k) must be created in the current tax year, while IRAs can be started the next year.

Never having run numbers, I don't know how much you can save by not paying SE tax on notary fees.

Reply by taxpro on 8/26/11 1:51pm
Msg #395156

Who is Irene? n/m

Reply by jba/fl on 8/26/11 2:34pm
Msg #395167

She is a windy lady, blowing by. n/m

Reply by taxpro on 8/26/11 2:58pm
Msg #395176

Oh, THAT Irene! Duh! n/m

Reply by Art_PA on 8/26/11 2:34pm
Msg #395168

Re: Who is Irene?

Hurricane attacking the East Coast. Turn on the Weather Channel.

Reply by Glenn Strickler on 8/26/11 2:35pm
Msg #395171

Everyone n/m

Reply by Glenn Strickler on 8/26/11 2:43pm
Msg #395175

Everyone's situation is going to be different ....

Personally, I paid FICA and my employer paid FICA for 40 years to the tune of $280k. Personally for me, that's enough and if I ever live long enough to get that back by collecting SS, I will be 82 at that point. Don't want to give them any more.

But that is a choice everyone must make for themselves. The calculation is going to be different for everyone.

Reply by Bob_Chicago on 8/26/11 3:27pm
Msg #395184

Irene,good night,Irene.I'll see you in my dreams.Be safe n/m

Reply by John Tennant on 8/26/11 3:47pm
Msg #395186

Be sure and consider a Roth Ira. Long term, no tax on return of your investments. That is for life. Also, you do not have to draw anything out at 70 1/2.

Reply by Ali/IL on 8/26/11 5:22pm
Msg #395205

Is it possible to collect unemployment as an independant contractor?

Reply by jba/fl on 8/26/11 5:23pm
Msg #395206

No. n/m

Reply by Buddy Young on 8/26/11 5:41pm
Msg #395208

For younger people a 401k is the way to go, It's a pre tax deduction

Reply by John Tennant on 8/26/11 6:44pm
Msg #395215

Yes it is a pre tax deduction. Then everything is taxed at a later date, usually at a higher rate.

Roth Ira is an after tax contribution, and if left in for 5 years, all accumulated dollars are totally tax free.

Do the math and you will find the $5K max contribution will compound into a substantially larger retirement fund.

My wife and I are semi retired and have been in the Roth program for many years. We found out early on just how fast the returns compounded. Just like the compound interest you pay on your home loan. Ever look at how large that is in relation to your actual purchase price???

Oh well, to each his own.