Taxes Employed vs. Self Essay

Pages: 2 (755 words)  ·  Bibliography Sources: 2  ·  File: .docx  ·  Level: College Junior  ·  Topic: Careers

Self-Employed vs. employed taxes

Tax issues are one of the biggest issues in business and/or employment as they can seriously affect the bottom line of any organization, small or large and can affect the individual on a multitude of levels (Bruce, 2002). With regard to taxation there are also various aspects of employment type that determine type and amount of tax and how that tax is paid. For the most part the two main classifications of employment type are employees and self-employed individuals. These two classifications can make significant differences in the way taxes are paid and the amount of those taxes, to both the state and federal governments and in some states even the local regional governments. This work will briefly discuss these differences and in a form of comparison of advantages and disadvantages of each classification with regard to taxation.

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The main and most enduring difference between the employed and the self-employed is the manner in which taxes are collected. Taxes for federal state (and possibly local) governments are collected within the payroll system for employees and these taxes are then paid to the government entity via the employers system of payment (usually quarterly) (Bruce, 2002). Self-employed individuals are themselves responsible for making quarterly tax payments directly to the government entity. If an individual self-employed person fails to do this than all taxes due (sometimes with penalties and interest) are due in a lump sum at the close of the tax year. This change is often a challenge for the self-employed as so much of the focus of most businesses is on taking care of overall business needs rather than thinking about personal expenses (Buffington, 2005).

TOPIC: Essay on Taxes Employed vs. Self-Employed Assignment

There is also an identifiable tax situation that affects newly self-employed individuals more than others, in the first year of self-employment the individual is required to pay (quarterly) the same amount of tax they paid the previous year as an employee. Though most will see a return on this at the close of the tax year they are likely not going to earn anywhere near the amount they earned as a salaried or wage employee so this tax amount may be a serious expense in the first year that must be saved and accounted for from a business that… [END OF PREVIEW] . . . READ MORE

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"Taxes Employed vs. Self."  Essaytown.com.  November 25, 2011.  Accessed August 3, 2021.
https://www.essaytown.com/subjects/paper/taxes-employed-self/2049251.