Who pays the payroll taxes?
If you owned a business with multiple employees, your business would pay the employer’s share of payroll taxes for each employee, including yourself, and each employee would individually pay his or her own share of payroll taxes out of their gross wage. When you are self-employed, your one-person business pays the employer’s share of payroll taxes out of its revenue stream and you pay the employee’s share of payroll taxes out of your tax-advantaged gross earnings (gross revenues minus expenses). The IRS calls this arrangement a “self-employment tax” but it is really just a scaled-down version of the taxes paid by an employer with multiple employees. Your one-person Solo W-2™ division operates just like a one-person business. Your one-person division pays the employer’s share of payroll taxes out of its revenue stream and you pay the employee’s share of payroll taxes out of your tax-advantaged gross wage (division revenues minus expenses).
