Taking control of your financial future and forging an entrepreneurial path seems like a great way to build wealth and get out from under the thumb of annoying bosses and even more annoying coworkers. It’s the American Dream. In the recent economic meltdown, many people were forced out of their jobs and used the opportunity to start businesses of their own. Now here’s something you may not expect me to say: It was the ones who failed at being self-employed and had to find a “normal” job who were better off.
Now, don’t get me wrong. I’m all for the entrepreneurial spirit. I think that initiative is one of the great things about this country. But we have a burdensome tax system that tends to punish those who start their own businesses!
You’d think that entrepreneurs would get tax breaks of all kinds simply for starting a business, taking financial risks, and keeping the economy going. It should be that way. However, many brand new entrepreneurs discover all too quickly that it’s the other way around.
When someone works for an employer, the employer splits the cost of Social Security and Medicare with the employee, each paying a portion. And, the employer takes off the employee’s taxes before the employee gets their check. So the paycheck might be lower but it all belongs to the employee.
Now consider the entrepreneur who needs every advantage he or she can get: They have to pay Social Security and Medicare entirely themselves, and the money they get in hand from customers still needs to be split into income and taxes.
On the website Chron.com, Associated Press writer Joyce M. Rosenberg recommends that entrepreneurs put 40% of all after-business-expense income into a bank account that they can give to the government in the form of taxes. (Read the article here).
It’s a disappointing reality that entrepreneurs who need a brief advantage to get their businesses running are expected to pay more than those who work for someone else.
So what are you waiting for? Start your own business today! The IRS needs to bolster its revenue stream.
[Image source: thepatrick]