How to Avoid the Underpayment of Estimated Tax Penalties on Your Personal Tax Return

As overall interest rates have crept up over the past few years, so has the interest rate assessed by the IRS on taxpayers that owe significant taxes with the filing of their personal income tax return.  Going back to the first quarter of 2022 that underpayment interest rate was 3%.  Gradually increasing over the past 2 years, the assessed IRS rate on underpayments of taxes is now at 8% for the fourth quarter of 2023.  For taxpayers who generally saw their Underpayment of Estimated Tax Penalty assessed in the amount of $500 on their tax return when a large tax balance was owed resulting from not paying estimated taxes in prior years, that penalty quite possibly may jump to more than $1,200 under a similar tax shortfall scenario in 2023, an increase of more than 250%.

Paying a fourth quarter estimated tax will help reduce an assessed penalty, but not by very much if nothing was paid in quarters 1, 2 and 3.  Assuming you currently have the funds for the taxes to be owed set aside for the current year, one alternative to avoid the possible assessment of this tax shortfall penalty is to take advantage of the 60-day rollover rule.  A taxpayer is allowed to take a distribution from an IRA or employer plan and roll over the funds within a 60-day period of time.  For a taxpayer facing a tax shortfall and looking to avoid an Underpayment of Estimated Tax Penalty assessment, they can take the IRA or retirement plan distribution in the amount of the projected tax shortfall and withhold the entire amount of the distribution for federal and state taxes – thus, getting the tax shortfall paid into the IRS and state by December 31, 2023.  Although the taxpayer has 60 days to roll over the full amount of the gross distribution (distribution amount before withheld taxes), we recommend rolling over the funds within a week or two to be sure the rollover isn’t forgotten.  One last caveat to note, the IRS limits taxpayers to making an IRA-to-IRA rollover only once per any 12-month period of time.

Student Loan Repayment Program Update

For taxpayers and borrowers making student loan payments, they should check out the Saving on a Valuable Education (SAVE) Plan that partially went into effect this past summer.  The SAVE Plan replaces the Revised Pay As You Earn (REPAYE) Plan.  Additional SAVE Plan benefits are scheduled to be implemented beginning July 2024.

The SAVE Plan is an income-driven repayment (IDR) plan for student loans.  Under this IDR plan, monthly payments are determined based upon the borrower’s income and family size.  There are two major changes that were implemented as a result of the SAVE Plan this past summer that may impact the amount of the monthly student loan payment and are based upon the borrower’s “discretionary income” calculation noted below:

  1. A borrower’s discretionary income is the difference between their Adjusted Gross Income (AGI) and 225% of the poverty line (exemption amount).  Because the SAVE Plan increased the exemption amount from 150% to 225% of the poverty line, a borrower’s discretionary income will be lower, and they may qualify to make a lower monthly student loan payment.
  2. If a taxpayer files his or her income taxes separately from their spouse, that borrower can exclude their spouse’s income in determining their AGI, resulting in a lower AGI amount and therefore potentially qualifying for a lower monthly loan repayment amount.

One major consideration with regard to item #2 above, taxpayers will need to determine if the total dollars being saved as a result of making smaller loan payments when excluding a spouse’s income in calculating IDR will result in a larger cash benefit when compared to the potential increase in income taxes from filing taxes separately from their spouse.  Generally, taxpayers will see a tax benefit when their tax filing status is married filing jointly compared to married filing separately.  Married filing separately is generally not a tax favorable filing method for most married taxpayers.  Taxpayers considering filing taxes separately from their spouse to take advantage of excluding their spouse’s income in the IDR calculation, should consult with their tax preparer as well to determine whether or not there is a significant tax cost as a result from filing taxes separately.

Stay Safe Shopping Online This Holiday Season

Shoppers need to remain on the alert for internet predators and scam artists while working on their holiday shopping list this time of year.  As a helpful guide, the IRS has posted the following tips on their website to help protect shoppers doing their on-line shopping this holiday season.   

  • Shop at sites where the web address begins with “https” – the “s” is for secure communications and look for the padlock icon in the browser window.
  • Don’t shop on unsecured public Wi-Fi in places like a mall or restaurant.
  • Keep security software for computers, tablets and mobile phones updated.
  • Protect the devices of family members, including young children, older adults as well as less technologically savvy users.
  • Make sure anti-virus software for computers has a feature to stop malware, and that there is a firewall enabled that can prevent intrusions.
  • Use strong and unique passwords for online accounts.
  • Use multi-factor authentication whenever possible. It helps prevent thieves from easily hacking accounts. The IRS also reminds the tax community that the Federal Trade Commission this summer updated their standards and now requires tax professionals to use multi-factor authentication to protect information.

A few other safeguards to consider:

  • Ask your credit card company to provide alerts for total purchases in excess of a set threshold in a month.
  • Use your credit card for online purchases and avoid using a debit card.  Most credit cards have a payment protection plan in place, debit cards do not.
  • Avoid providing your social security number.
  • Carefully look at email addresses for validity pertaining to email notifications and solicitations you receive in your email inbox.
  • Supervise your children’s online purchases and their use of your credit card while making internet purchases.

Ten Tips to Cut Your 2023 Taxes

As the year winds down, now is the time to take steps to cut your 2023 tax bill while being mindful to not defer so much taxable income that you push yourself into the next tax bracket in 2024. Prior to December 31st:

  1. Increase your 401(k) and 403(b) contributions if you haven’t been contributing at the maximum rate all year. This year you can put up to $22,500 into your 401(k) or 403(b) plan at work. Anyone 50 or older by December 31st can put away an additional $7,500 for a total of $30,000. Contributing to a 401(k) or 403(b) plan at work is one of the best tax shelters available to you during your working years.
  1. If you’re self-employed, consider setting up a Solo 401(k). A Solo 401(k) plan lets a self-employed person hit the $66k retirement plan max with less income than a SEP IRA, and allows a self-employed person aged 50 or older to put away $73.5K for 2023 versus $66k into a SEP IRA. Solo 401k’s are also Roth Conversion friendly by accepting rollovers of tax-deferred income from your current IRAs. 
  1. Take a look at your withholdings and instruct your employer to withhold additional taxes to avoid getting hit with an underpayment penalty if you haven’t had enough taxes withheld during the year. (Take a look at the IRS’ Withholding Calculator to set your withholdings for 2024.) 
  1. Consider selling your investments held in non-retirement accounts that have decreased in value since your capital losses can offset other capital gains realized during the year (including capital gain distributions from your mutual funds). Excess losses can then be used to offset up to $3,000 of wages and other income while any remaining losses get carried over to next year. Make sure to wait at least 31 days before buying back a security sold at a loss, or the IRS will disallow the loss under the “wash sale” rules. Please note that wash sale rules currently don’t apply to crypto losses. 
  1. Consider selling your investments held more than one year that have increased in value if you are in the two lowest tax brackets since the long-term capital gains rate for you will be 0%. You can then buy back those securities, and the “cost-basis” will be the higher amount. Wash sale rules don’t apply to securities sold at a gain. This strategy will save you taxes down the road when you sell these securities. Just make sure that the capital gains realized don’t push you out of the 22% tax bracket since you’ll be taxed on those long-term capital gains that fall outside that bracket at 22%. 
  1. Send in your January 2023 mortgage payment early enough so it will be processed prior to 12/31/23. By sending in your payment a few weeks early, you can deduct the interest portion of that payment a full year earlier if you will be itemizing your deductions. 
  1. Clean out your closets and donate your clothing and household items to a charitable organization, since “non-cash” contributions are deductible if you itemize. Don’t forget to get a receipt. And you should make a list of each item donated, along with its condition, and snap a few photos as well. Remember, only donations of clothing and household items in “good condition or better” qualify for a deduction. 
  1. For gifts of money, making your donation by credit card before December 31st allows you to deduct the donation on this year’s return, even if you don’t pay your credit card bill until 2024. And you always have the option of donating appreciated investments to charities or a Donor Advised Fund. You get to claim your donation based on the value of the assets donated without paying any capital gains taxes on the appreciation. (Use this IRS tool to confirm a charity as legitimate.) Don’t donate investments that have decreased in value. Instead, sell them first, take the loss on your taxes, and donate the money received from the sale. Learn more about Managing Your Charitable Donations. 
  1. Pre-pay your projected state tax shortfall if you’ll be itemizing your deductions and will have less than $10k in state income taxes and real estate taxes combined. Practice owners operating in Massachusetts and many other states as S-Corps and Partnerships can now get around the $10k max and pay their personal Mass taxes on the flow-through profit as a deductible expense to the practice known as the Entity Level Tax. 
  1. Pre-pay and pay off your medical bills if your total allowable medical expenses exceed 7.5% of your income and you itemize.  If you have a qualifying high deductible health insurance plan in place, max out your 2023 Health Saving Account at $3,850 if single or $7,750 for families by 4/15/24. Anyone 55 or older can add $1k to their H.S.A.s.

 Practice owners should begin by finalizing their plans to replenish supplies and pay outstanding bills by 12/31, purchase and install equipment and technology by 12/31, and figure out the maximum retirement plan contribution allowable that makes the most long-term financial sense.

Lastly, as a bonus year-end planning tip, don’t forget that you have 180 days from the date you realize a capital gain to invest up to the full amount of the capital gain into an Opportunity Zone fund and defer paying income taxes on your realized gain until that investment is sold.

And, as always, evaluate whether you’ll save any taxes by postponing 2023 income or deductions into 2024 or by accelerating 2024 income or deductions into 2023. Don’t forget that the Massachusetts millionaire’s tax started 1/1/23, so successful practice owners with income greater than $1M per year should incorporate that new tax in their planning.

IRS Announces Small Increases to Retirement Savings Limits For 2024

Earlier this month, the IRS announced the cost of living adjustments applicable to the various retirement plan limitations for 2024, with most of these tax advantaged savings opportunities increasing slightly from the 2023 limits.

Most working professionals have access to a 401k plan or 403b plan at work. Amounts contributed to these plans generally reduce your taxable earnings and always grow tax deferred. For 2024, you can contribute up to $23k into a 401(k) or 403(b) plan through salary deferrals, up from $22.5k in 2023. With the Roth option, you forgo a current year tax break in exchange for a promise from the government that those contributions will grow tax-free.

Anyone 50 or older by December 31, 2024 can contribute an extra $7,500 into their 401(k) or 403(b) plan through salary deferrals next year, for a total annual contribution of $30.5k, up by just $500 from the 2023 max.  Please note that you don’t need to actually wait until your 50th birthday to be able to start making these catch-up contributions, so adjust your deferrals as of the first paycheck of that monumental year.

Many smaller employers offer their staff access to SIMPLE/IRAs instead. SIMPLE’s work just like 401(k) plans, which means it’s up to each employee to fund the bulk of his or her retirement savings account through salary deferrals. For 2024, the maximum contribution into your SIMPLE as salary deferrals increases to $16k, up just $500 from last year’s limit of $15.5k.  Anyone 50 or older by December 31st can put away an additional $3.5k in 2024, for a total annual salary deferral of $19.5k. Your employer will generally make matching contributions into your account of up to 3% of your salary.

And if you are self-employed, you can contribute up to 20% of your net self-employment income (or 25% of your gross W2 wages paid through your practice) into a SEP IRA. The maximum contribution into your SEP IRA for 2024 increases by $3k to $69k. Solo 401k’s allow self-employed individuals to hit the $69k max on less income and increase the max for people 50 and over to $76.5k as well.

And lastly, the maximum salary for many retirement plan calculations jumps to $345k for 2024, up by $15k from the 2023 max of $330k.

Increase to IRAs

Don’t forget about IRA’s. The amount you can contribute to an IRA increases by $500 to $7,000 per person for 2024. Even if you’re covered under a retirement plan at work, you and your spouse can each contribute up to $7,000 into a traditional IRA or Roth IRA next year, as long as your combined wages and net self-employment income exceeds the total amount you both contribute. Anyone 50 or older can contribute an extra $1,000, increasing the total allowable contribution to $8,000. And don’t forget, you have until April 15, 2024 to contribute to your IRAs for 2023.

There is a bit of good news for people looking to contribute to a Roth IRA in 2024. The amount you can earn and still contribute to a Roth increases by $8k for single individuals and $12k for joint filers as follows:

  • Single Individuals – Phase-out begins $146,000 and ends at $161,000
  • Married Couples – Phase-out begins $230,000 and ends at $240,000

If your income is too high for a Roth, don’t forget that the rules changed more than a decade ago, eliminating the income limitation as of 2010 for people looking to convert their IRAs to a Roth IRA. This tax law change provides high-income taxpayers with a great opportunity to get money into these tax-free investment accounts.  For more information, please check out our article Consider Converting Retirement Accounts to a Roth IRA.

And finally, if you’re married and your spouse isn’t covered under either an employer sponsored or self-employed retirement plan during the year, the phase-out range for your spouse making a deductible IRA contribution has increased to $230k – $240k for 2024, which is identical to the Roth IRA phase-out limits.

Re-Set Your 2024 Retirement Savings Budget

Most people won’t be able to max out these tax-advantaged retirement options unless they get on a budget and put away a set amount of money each month. With 2023 winding down, now’s the time to start thinking about resetting your monthly retirement savings goals for 2024.

I-Bonds Interest Rates Adjusted to 5.27%

We first wrote about I-Bonds in an article included with our November Newsletter available at:

I-bonds are a great place to park some extra money if you are worried about the short-term prospects for the stock market and are nervous that increasing interest rates will cause bond funds to decline in value too.

According to:

A Series I savings bond is a security that earns interest based on both a fixed rate and a rate that is set twice a year based on inflation. The bond earns interest until it reaches 30 years or you cash it, whichever comes first. NEWS: The initial interest rate on new Series I savings bonds is 5.27% percent through April 30, 2024.

More information on I-Bonds is available at:

Managing Your Charitable Donations

In addition to the personal tax deductions allowed to be claimed for medical expenses, mortgage interest, and state & local taxes paid in a year, taxpayers are allowed to claim a tax deduction for donations to charitable organizations and qualifying tax-exempt private foundations.

As defined by the IRS, qualifying charitable organizations are: “Organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes and that meet certain other requirements are tax exempt under Internal Revenue Code Section 501(c)(3).”

The IRS requires accurate records to be kept as confirmation in order to substantiate any claimed charitable deductions.  Therefore, when making a donation to a qualified charitable organization, taxpayers should maintain proper records in the event of an IRS audit at a later date.  Basic taxpayer record keeping rules for cash (cash, check, credit card, EFT) donations are as follows:

  • Taxpayers must maintain either bank records or a written acknowledgement from the charitable organization noting the amount and date of payment. Bank records include bank statements, canceled checks and credit card statements that show the date of payment, the name of the charitable organization and the dollar amount of the payment.
  • For any single donation of $250 or more in any one day, taxpayers must receive a written acknowledgement from the charitable organization by the earlier of the date the taxpayer files his/her tax return or the due date plus extensions of the tax return.
  • For taxpayers that have set up charitable donations through a company payroll deduction plan, maintaining a copy of the W-2 which shows the amount withheld for charitable contributions over the course of the year will meet the substantiation rules. Additionally, a year-end employer paystub or employer provided document will also satisfy the record keeping rules.

For donations of non-cash items, such as clothing, furniture, housewares, etc., taxpayers will need a receipt from the charitable organization.  Often, the organization will hand taxpayers a blank receipt reporting only the date of the donation.  Taxpayers should complete the form by listing out the items donated, and the fair market value of the items – estimated as best they can as of the date of gift.  There are several on-line sites that provide valuation guides to help donors determine the value of their donated items.  One such resource published annually by The Salvation Army is their “Donation Valuation Guide”:

For taxpayers who donate a vehicle (generally automobiles, boats and airplanes) and claim a charitable tax deduction in the amount of $500 or greater related to the donated vehicle, the taxpayer should receive a Form 1098-C from the charitable organization reporting the proceeds from the sale of the vehicle by the organization within 30 days after the date of sale of the vehicle.  The reported sales amount is the value allowed to be claimed as a tax deduction for the donated vehicle.

Taxpayers are also allowed to claim a tax deduction for donating investments that are held in their brokerage accounts.  Donating long term capital gain property such as stocks, bonds and mutual funds that are held in a taxpayer’s financial portfolio, to a qualified charitable organization allows taxpayers to claim a tax deduction at the investment’s fair market value as of the date of donation.  By donating long term capital gain property, taxpayers can avoid paying the capital gains tax on the appreciated value of the investment while still being allowed to claim the full fair market value of the investment as a tax deduction.  For a donation of a short-term investment, taxpayers are only allowed a charitable deduction equal to the lesser of the cost basis of the security or the fair market value of the security at the date of donation.

When donating time or services to do volunteer work for a charitable organization, taxpayers are allowed to claim a charitable deduction for unreimbursed out-of-pocket expenses incurred while doing the volunteer work.  The qualified expenses must be nonpersonal and directly related to the services being performed for the charitable organization.  For a taxpayer’s record-keeping purpose, the taxpayer will need to obtain a letter of acknowledgement from the organization for the out-of-pocket expenses incurred of $250 or greater.  To substantiate the charitable services performed by the taxpayer, the acknowledgement letter must include a description of the service(s) performed by the taxpayer.  Taxpayers are not allowed to claim a charitable deduction for the “value of their services” provided on behalf of a charitable organization, all that is allowed to be claimed as a charitable deduction for tax purposes is the unreimbursed out-of-pocket expenses incurred specific to providing services that directly benefit the charitable organization while volunteering time to the organization.

For those taxpayers over age 70 ½ and who do not itemize deductions on their tax returns, a qualified charitable distribution (QCD) would be an easy way to make a charitable donation to a qualified charity and still be able to recognize a tax benefit.  Taxpayers age 70 ½ are allowed to take a distribution from their IRA and donate the distributed funds from the IRA directly to a charitable organization.  No tax deduction is allowed for the charitable donation, but the taxpayer does not recognize taxable income on the distributed IRA funds done as a QCD.  For the IRA distribution to be a QCD, this transfer of funds must be done as one transaction, directly from the taxpayer’s IRA to the charitable organization – the taxpayer cannot take a distribution from their IRA and separately write a check to the charitable organization.  For taxpayers age 73 or older, the QCD will also count toward the taxpayer’s annual required minimum distribution.  The maximum QCD allowed per taxpayer per year is $100,000.  A QCD can only be made to 501(c)(3) charitable organizations.   Contributing to private foundations or funding your donor advised fund via a direct IRA distribution would not qualify as a QCD.

Taxpayers are also allowed to make charitable contributions directly from their business.  Although the payment may be made directly from a taxpayer’s company’s operating bank account the payment is not reported as a business expense.  The payment will be allowed and reported as a charitable deduction on Schedule A, personal itemized tax deductions.

And, as we have all seen throughout the internet world, scammers are present everywhere.  Taxpayers need to be aware when solicited by unknown charitable organizations if the solicitation is for a legitimate charitable organization or not.  To help taxpayers verify a charity as being real or fake, the IRS has established a search tool on their website.  The link to the IRS Tax Exempt Organization Search is Tax Exempt Organization Search | Internal Revenue Service (

While gifting to exempt organizations will generally qualify for a tax deduction, there are several common donation scenarios that don’t qualify to be claimed as a tax deduction on your tax return.  The following list of items will not qualify as tax deductible donations:

  1. Donations to political candidates, political parties, and political actions committees (PACs).
  2. Donations to civic leagues and chambers of commerce.
  3. Donations to specific individuals for benevolent purposes to financially assist those individuals such as donating funds to a family to help them recover from a disaster or for an expensive medical procedure that they may not be able to afford.
  4. Guestimates and undocumented donations. Examples include small cash donations without having proper documentation while attending religious services or dropping a bag of clothes and housewares at the local donation drop-off bin without receiving a donation receipt.  Even for such small cash gifts, the IRS requires proof of the donation via a cancelled check, credit card statement or letter of acknowledgement of receipt from the religious organization for gifts less than $250.  Similarly, the IRS requires a receipt from the charitable donation site that is the recipient of property in kind donations listing out the donated items along with the fair market value of each item claimed on the list.
  5. Promises to pay and pledges to a charitable organization. Once the pledge has been paid it then qualifies as a charitable donation for tax purposes.
  6. The purchase of charitable fund-raising tickets. Lottery and raffle-based tickets that taxpayers purchase when sold by charitable organizations as part of their fund-raising do not qualify as a tax deduction.
  7. The cost of tickets to attend a charitable event. However, the amount of the ticket price that exceeds the value of the service or meal that is received by the attendee would qualify as a charitable tax deduction.  The charitable organization should provide the attendees of the event with the amount paid for the ticket that is in excess of value received – that portion of the cost will qualify as a charitable tax deduction.
  8. The value of a week’s stay at your vacation rental home that you donate to a charity auction event. Although you would be able to determine the value of the free week of use of the rental being donated, the IRS does not allow a tax deduction for “less than an entire interest” in a property.  Because you are only donating one week’s use of the property, this donation would be considered a “partial interest” and would not be a qualified charity deduction.  And conversely, the purchaser of the week’s rental use at the charity auction would only be allowed a charitable tax deduction for the excess of the price paid for the auction item above the market value of the week’s rental.
  9. The value of your time or services while volunteering your time to a charitable organization.


What to do if you Unexpectedly Receive a Hard Credit Inquiry?

Q:  I just had a hard credit inquiry alert even though I did not apply for a line of credit. Any advice on what to do?

A: That’s unsettling. Are you sure this wasn’t something done by the lender for your practice? Assuming this is in connection with a new line of credit:

1. First contact the lender that pulled your credit to notify them that you did not apply for a Line of Credit with them. There should be a phone number available, or you can look up the lender online. Lenders take concerns about fraudulent activity very seriously.

2. Sign up for credit monitoring through one of the 3 credit reporting agencies – TransUnion, Experian, Equifax. TIP – you might get your credit monitoring at a discounted price through AAA.

3. Lock the credit at the other two credit reporting agencies where you don’t have credit monitoring. NOTE – you’ll need to unlock the credit at all 3 agencies whenever a lender or anyone else needs to look at your credit. It’s a minor hassle, but worthwhile.

4. A good place for information on credit-related topics is This is a website that the 3 credit reporting agencies were required to set up to help out consumers. TIP: you can receive one free credit report from each agency annually.

5. Lastly, visit to report this potential identity theft and get a recovery plan.

Foreign Account Reporting Reminder

Below is a brief summary of reporting foreign accounts, gifts and inheritances. Please note that the penalties for non-compliance can be onerous.

If you inherit or receive a gift from a foreign person of more than $100k:

If you have a foreign account open at any time during the calendar year, no matter how low the balance:

  • Complete the questions at the bottom of the Schedule B attached to your personal return
  • Check the boxes stating that you have a foreign account open, no matter how low the value

If you have foreign accounts open that exceed $10k in any calendar year:

If you are married filing jointly and have foreign accounts with a combined value of more than $150k during the year or more than $100k at 12/31, or any other taxpayer with a combined value of more than $75k during the year or more than $50k at 12/31:

Social Security Max Increases to $168,600 for 2024

Most years, the government bumps up the maximum Social Security taxes that you can pay.  For 2024, the maximum wage base jumps to $168,600, an increase of $8,400, or 5.2%, over the max of $160,200 that was in place for 2023.

At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $10,453. This is $521 higher than the 2023 max of $9,932. Employers then match any Social Security taxes withheld from their staff’s salaries.

Higher Medicare Taxes Due To The Affordable Care Act Passed In 2012:

Enacted more than ten years ago, the employee portion of the Medicare tax jumps from the current rate of 1.45% to 2.35% on earned income in excess of $200k for single individuals and $250k for married couples filing a joint tax return. As of now, the employer will continue to match their employees’ Medicare taxes at a rate of 1.45%, which means the total marginal Medicare tax will be 3.8% for high-income taxpayers. This tax is reported on the Form 8959.

For example, if you’re single, and earn wages of $500k from your job, expect to pay $2,700 in additional Medicare taxes (($500k – $200k) * .9%) for 2013 and beyond.

To increase taxes for high-income individuals even more, the Medicare tax continues to apply to unearned income. Anyone with income over the $200k or $250k threshold should expect to pay Medicare taxes at a rate of 3.8% on interest, dividends, capital gains, and net rental income (except if you rent office space you own to your practice) in addition to any federal and state income taxes due on this income. This tax is reported on the Form 8960.

Calculating the Self-employment Tax:

If you’re self-employed and earn more than $400 in net profit from your business, you’re subject to Social Security and Medicare taxes as well. Known as the “self-employment tax”, you’ll need to complete a Schedule SE to calculate this tax, and then report the amount due on your Form 1040 in addition to your federal income taxes due.

The self-employment tax is based on a Social Security tax rate of 12.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee’s portion and the employer’s portion of both taxes. Remember, when you work as an employee, your employer matches the Social Security and Medicare taxes withheld from your pay.

Unlike most other taxes, when dealing with self-employment taxes, the more you earn, the less you pay.