14 July 2010

Holy Taxman, AK FAN!

A nameless buddy of mine (who we shall call AK Fan since he didn't want me to sarcastically disguise him as ObamaFan) runs a family business. We had the following conversation pertaining to unemployment insurance earlier this week:

AK Fan: Just got a letter from the state. They are upping the taxable wage base on
unemployment and workers comp. I believe it was $8000 last year now its
Me: unbelievable
AK Fan: But effective 1/1/11 it's 13k
Me: All these taxes and fees. HOLYSHIT!
AK Fan: And effective 1/1/12 it's 16k
Me: That's a 30% increase! Honestly, we're bankrupting ourselves!
AK Fan: And a new penalty for the mis-classification of workers is $5000 per
unreported worker per report and reports are quarterly. So, it's up to $20k
per year for an unreported employee. Crazy.
Me: Holyshit, that's crazy!
AK Fan: Social handouts sucking $$$$ from productive business
AM me: Yep. Nothing more.

The sad thing is, it's not just unemployment tax and workers comp. Most people don't realize that employers have to match your Social Security Tax as well. So, what is 7.65% of your gross taxable wage, your employer kicks in 7.65% as well. That's for every employee! What's worse is, that starting this year, with the new tax/health care, you will see a new line item called "medical benefits paid by employer" on your W-2 form. This is the portion of your health insurance that is funded by your employer that you don't really see. Now, no one is currently taxed on that, but we know how the government operates on the boiling frog method (for those who don't know what that is, you boil a frog by putting it in a pot of cold water and slowly turning up the heat).

From working in accounting, we see taxes for all sorts of stuff, on top of your normal income taxes. In all honesty, the associated fees with business make business almost not worth while.

If we took a normal LLC, run out of one's home or perhaps a small owned or leased office, here's a short list of taxes and assesments one would see. We'll also assume that there are a few employees and there aren't any private contractors.

1) Fed Tax
2) State Tax
3) Local Tax
4) Sales / Use Tax
5) Personal Property Tax
6) Real Estate Tax
7) Registration Fees
8) Regulation authority Fees
9) Worker's Comp Insurance
10) Unemployment Insurance
11) Compliance examination fees
12) Incorporation Fees
13) Employer's portion of FICA

To think, like we discussed above, in one way or another, these taxes and fees find their way into paying for every worth while program (roads, schools, military) and every worthless program (social security, medicare, medicaid, and food stamps). That sucking sound we hear, is the continued economic "recovery."

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