Paying FICA When Self-employed

I have a masters in accounting and I have no idea what you are talking about. What the heck are FICA credits?

So to answer the question I actually understood when you are self employed you must deduct the employee and employer FICA distribution and then when you file your taxes you are given a deduction for the employer portion.
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Oh wow, really? Social Security contributions are called FICA contributions! Yes I am being sarcastic since I answered your question accurately about deducting FICA from your earnings when self employed. Still doesn't explain what you are talking about so far as credits go.

Doesn't really matter anyway, it ain't going to be there when we retire so it seems silly to be worrying about it like you are funding a retirement plan.

Talk to an account/tax preparer. I worked for an accounting firm years ago. At that time a small business owner had to file a 1040 + a schedule C (business deductions) and a schedule SE (self employment form or Social Security form). There may be other forms it's been over 20 yrs.

You will also be able to claim Social Security benefits through your husband.

i think J.'s talking about the amount of 'credits' (are they called quarters, maybe?) that one has to rack up before being considered eligible to collect social security.
i remember my retired aunt had to go back to work part-time for a year in order to reach hers, so that she could collect the full amount.
is that what you mean, J.?
khairete
S.

When I owned my own child care center I had a business account. I put every penny paid in into this account. If I got cash I deposited it, if it was direct deposit it went straight in. Fund raisers, donations, etc...every single bit of money went through this account. I did not use this checking account for anything.

If I accidentally forgot my personal checkbook and was at Walmart buying groceries for the center and realized I needed milk at home, I did not buy my personal milk at that time, I went home after work and got my own checkbook. Keeping the money completely separate is extremely important.

I paid the staff out of this account, I bought groceries and paid all bills out of this account, bought gasoline for the van, repairs on it, etc...it was the whole financial record of my company.

The bank gave me a payment book when I opened the account and this book was where I paid my taxes. I'd had the bank a slip from the payment book and they'd do a direct deposit for my taxes straight out of this business account.

It was very easy because it took care of both federal and state and payroll too.

ETA a few days later - of course, please check with your own accountant as I am not in the tax biz in any way, shape or form...!

From www.ssa.gov (social security’s website)

Latest amount & QC explanation
The amount of earnings required for a quarter of coverage (QC) in 2013 is $1,160. "Quarter of coverage" is a legal term, but you may also see the term "Social Security credit" (or just "credit") used elsewhere. A QC is the basic unit for determining whether a worker is insured under the Social Security program. No matter how high your earnings may be, you can not earn more than 4 QC's in one year.

History
See historical series of earnings needed to earn one quarter of coverage, 1978-2013.

For years before 1978, an individual generally was credited with a quarter of coverage for each quarter in which wages of $50 or more were paid, or an individual was credited with 4 quarters of coverage for every taxable year in which $400 or more of self-employment income was earned. Beginning in 1978, employers generally report wages on an annual, instead of quarterly, basis. With this change to annual reporting, the law provided that a quarter of coverage be credited for each $250 of an individual's total wages and self-employment income for calendar year 1978 (up to a maximum of 4 quarters of coverage for the year). After 1978, the amount of earnings needed for a quarter of coverage changes automatically each year with changes in the national average wage index.

Determination of the quarter of coverage amount for 2013
The law specifies that the quarter of coverage (QC) amount for 2013 is equal to the 1978 amount of $250 multiplied by the ratio of the national average wage index for 2011 to that for 1976, or, if larger, the 2012 amount of $1,130. If the amount so determined is not a multiple of $10, it shall be rounded to the nearest multiple of $10.

From the day you posted this question - Edited: We need to work for 10 years (40 quarters) paying into SS in order to draw SS between 62 and 67. You also need to pay into Medicare. Maybe SS will be different by the time we are 67, but you can't be thinking about that right now, J.. You need to use today's rules to plan your life. It is also really important to pay into Medicare no matter what you think might happen to SS. You are smart to think about this.

Talk to your tax advisor about it. IF you are self-employed, you have to pay double the amount, since companies cover part and individuals who work for them pay part of FICA. There's a cap for paying SS, according to your salary, but you pay 2.9% of what you make for Medicare, with no cap.

Your tax advisor can tell you the real nitty-gritty here, but you can't just declare yourself self-employed, not make a profit and not pay into SS, and have it count toward your 40 quarters. If this were allowed, people would do it all the time and never pay in.

If you look at SSA.gov/oact/cola/QC.html, it tells you that you must have a minimum amount in earnings in any given quarter to qualify for SS credit, provided that you make a minimum amount of profit in one year. (Prevents people from making just the minimum in one quarter and then losing money the rest of the year...) Go to SSA.gov and search earnings/social security credits and minimum self-employment income.

I urge you to really figure out the Medicare part of this equation. I don't know the rules about how long you have to pay into it, but I think it's even more important that SS. (Just my opinion.)

Knowledge is power. Get the knowledge from profesionals who know exactly how this works.

We own our company, I am the CFO and I am not sure what you are talking about.

I use Quickbooks Pro 2013 and when I run payroll, all taxes are automatically programmed and put into an account in my payroll center. On the 1st of every month, I go in and pay these taxes electronically which are... the personal and company portions of taxes, social security and medicare. This payment is due by the 15th of each month and runs anywhere from $4000[$10,000+ depending on if I cut special checks, 401K, etc.THEN, at the end of EACH quarter, I go in and electronically file a 941 report which shows the IRS in a tax form what taxes I have paid in the quarter. THEN, I go to the TWC (Texas Workforce Commission) where have another quarterly report and pay Unemployment taxes.

There are a lot of t's to cross and i's to dot when you run a business. You DO NOT want the IRS on your back.

I have legal and tax counsel where I have paid UP FRONT substantial fees so that if I have a question or if something needs to be changed, altered, etc they are there to make sure I am 100% spot on correct. It is worth every penny to have the legal and tax counsel.

Also, don't think about the your company not being succesful...You invest what you can without going into debt, make a solid business plan and move forward. Some months might not be as good as others.... this happens with every business. For example.... our March was slow and now our May is so busy we are struggling to keep up with demand.

Good lluck with your venture!

I wouldn't spend much time thinking about SS. Like others have said, it's going to be a miracle if it's around after the Baby Boomers finish raiding it. My accountant handles all of the related taxes.

What you want to get when you're self-employed is a SEP-IRA. It's an IRA plan for those who are self-employed. A good financial planner can get you going with one so you have a real retirement savings.