Welcome to Curious Business
Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
Friday, October 05, 2012
The Taxman Cometh
Every quarter I gripe about payroll taxes sucking the lifeblood (a.k.a. cash) out of my business. How high can those taxes be on the pittance that I pay myself? Many readers earn more in a week than I make in a quarter. In fact, your paycheck very likely exceeded Curio City’s gross sales last quarter.
“Payroll taxes” include Massachusetts DUA (unemployment), Mass. Workforce Training, Medicare (company), Social Security (company), and FUTA (federal unemployment). That money comes out of Kraken Enterprises’s pocket. Then we have Medicare (employee), Social Security (employee), Federal Withholding, and State Withholding, which come out of my personal pocket. The distinction is only technical since Kraken’s pocket and my pocket are ultimately one and the same.
My business and personal “payroll taxes” together were a hefty 32% of payroll for Q3. The payments that I just made siphoned off 14% of this month's planned sales. Yes, I’ll probably recoup some of the federal and state withholding at the end of the year. The tax tables say that I wouldn’t need to withhold anything at all if my Curio City paychecks were our total household income. Fortunately, they are not. I suppose that a rational person would put the anticipated income tax money into a savings escrow rather than sending it to the government, but the 0.5% interest that it would earn hardly outweighs the distress of writing a big check at the end of the year.
I’m not bitching that my taxes are too high, btw. Our current historically low tax rates already can’t support the government services that we demand -- payroll taxes go to Medicare, Social Security, and unemployment insurance, which most of us are happy to have. But you can see why I decided to start the “lockbox” routine this month.