April 4, 2011 |
Dear Karen: I'm self-employed and make $20,000 a year. The tax lady calculated that I owe $1,600. Can this be right? Answer: Self-employment income is subject to both income tax and self-employment tax. Ordinary income can be reduced by standard deductions and exemptions, but income subject to self-employment tax cannot, said Donald Lucove, a CPA with Lucove, Say & Co. in Calabasas. "The self-employment tax is calculated using 92.35% of self-employment income at 15.3%," he said.