Self-Employment Tax

You're a shrink. You got your PhD in Psych, and your MD (so you can prescribe drugs...legally). You bill patients $400 an hour to whine to you about their mothers, and you put a loving balm in a bow and tie it up nicely so they don't jump off the ledge (this week). You're a professional. You work for yourself. You are self-employed. And this is both cool...and a drag. Were you working for some large mama corporation, you'd be able to just have some secretary do your taxes, and take your withholding. And it's likely you'd just be on a salary of a few grand a week to do your thang. But as an entrepreneur, doing your own thang, you do all that...yourself.

It gives you freedom to be creative and spend your practice's profits as you wish. Like...you really have been missing Maui, and there's The Headshrinker Ball for a week there in January. You're gonna go. It's a business trip. Legit. All kinds of drug vendors there selling everything from Zoloft to Lexapro. The trip is totally tax-deductible. And what about that new fancy computer? You want it. You buy it. It's a business expense, but yes, you'll enjoy it...personally. Oh, and your car? Yes, you get to deduct a lot of those expenses as well.

Well, the IRS ain't stupid (usually). So to get around or make up for the fact that, as an independent business, you get to choose to take allllll kinds of deductions that you couldn't take if you were working for a big corporation, you pay a self-employment tax. Think: 10-12 grand-ish a year for the privilege of being able to be independent and write off all the things you want to buy that are businessish deductions. And keep you sane (for your likely less sane clients) at 8 bucks a minute.