Why Your First Tax Bill Is Bigger Than You Expected
The paycheck that used to do the math for you When you worked for someone else, taxes came out before you ever saw the money. Federal income tax, Social Security, Medicare: all withheld automatically, all calculated by someone else's payroll system. You might not have liked the size of the deduction, but you never had to think about it. Run your own shop and that system disappears. Nobody withholds anything from the cash a customer hands over for a dozen roses or a wedding arrangement. The full amount lands in your bank account, and it looks like money you get to keep. A lot of first-year owners spend a good chunk of it before realizing the government still expects its share, just later, and all at once. Two taxes, not one A new florist shop owner, filing as a sole proprietor or a single-member LLC, owes two separate things on business profit: regular income tax, and self-employment tax. Self-employment tax is the part that catches people off guard. It covers Social Security ...