Posted by
Poor Richard Reborn on Monday, December 31, 2007 4:12:54 PM
The self-employed, small business owners, independent contractors, real estate investors, and professional practices (like accountants, attorneys, doctors and any other business where the owners rely on profits and may not receive salaries or wages) would have to file tax returns just like other businesses. They would pay the employer portion of taxes for their employees but would only have to pay the employee portion on their own earnings.[1]
The wisdom of this may escape some who think all small businesses make a ton of money. Remember that you must include unemployed moms who provide child-care in their homes, the local handyman, plumber, electrician, and yard-care person. You must also consider that the more highly compensated professionals – doctors, accountants, attorneys, architects, etc. - will still be paying a lot of money in taxes…in many cases they’ll pay the full 33%.
[1] Here again, the New IRS would need to develop a set of rules to make sure that greedy business owners would not take advantage by hiding money that was “earned income” in the business.