I'm self employed and the amount of tax being deducted from my business account doesn't match the amount in my payslip

Hi ellochewy,

Welcome to the QuickBooks Community! We'll help you check the calculations of your taxes. However, can you give us more details about your scenario? You are self-employed but you have a paycheck? Paycheck for us means you're employed, so you should talk to your employer regarding your tax deductions. 

We may have a different understanding of your scenario. Can you please provide more details about your earnings and the software you're using to get these calculations? We'll continue to help you.

Thanks in advance.

Hi, thanks for your response. I am self-employed through my LLC being taxed as an S Corp. Through this setup, I'm paying myself a regular salary via monthly paychecks. Is this not the recommended setup? How do most other self-employed individuals running LLCs pay themselves?

Additionally, I am using the foreign earned income exclusion because I am an expat in Hong Kong. Through this setup, regular income through paychecks should only be taxed a total of 15.3% comprised of social security + medicare (7.65% is the employee portion and the other 7.65% being the employer portion). 

As I mentioned in my original post, my payslip says that the employer social security + medicare contribution for my paycheck should be $286.88 ($232.50 social security + $54.38 medicare), but the actual amount deducted from my business bank account is double at $573.76 while another $286.88 is being deducted from each paycheck for the employee self employment taxes. This effectively means that the employer side is paying double at 15.3%. 

Would you know why the employer portion of social security and medicare is being payed double?

Thanks for getting back to us, @ellochewy.

To compute the foreign earned income exclusion, you must first know the amount of your:

• Foreign earned gross receipts
• Expenses related to the foreign earned gross receipts
• Deduction for ½ self-employment tax

The exclusion amount will be reduced by the pro rata share of your expenses and self-employment tax deduction. It is because you can't take deductions against amounts excluded from income.

For example, you operated a service business in a foreign country during all of 2020, and your:

• Schedule C Gross Receipts were $150,000
• Schedule C Expenses were $50,000
• Schedule C Net Income was $100,000
• Self-Employment (SE) Tax was $14,130
• Deduction for ½ SE Tax was $7,065

Also, your exclusion would compute this way. For the tax year 2021, the maximum foreign earned income exclusion amount is lesser than the foreign income earned or $108,700 per qualifying person. Since you are excluding $108,700 of your $150,000 gross receipts, you will need to multiply that same ratio by the expenses that are directly related to your Schedule C gross receipts.

The amount is then subtracted, which is entered on Line 45 of Form 2555, Foreign Earned Income, and is then entered as a negative amount on the appropriate line of Schedule 1 (Form 1040), with the notation Form 2555.

However, if you still want to know more about the calculation, I suggest getting in touch with the IRS.

Additionally, I've added these resources that'll help you learn more about managing and filing payroll taxes and forms in QuickBooks:

• Manage Automatic Tax Payments and Form Filings
• Payroll Taxes and Forms QuickBooks Payroll Does For You

Let me know if you have other questions. I'm always here to help. Keep safe always.

Hi, thanks for your response but this doesn't quite address the problem. My issue here though is that while my pay slip says that the total amount to be deducted on the employer side is $286.88 ($232.50 social security + $54.38 medicare), the actual amount deducted from my employer side is double at $573.76.

Do you know why this would be happening?

I can see the importance of ensuring taxes are deducted correctly, @ellochewy.

I appreciate you for checking on the suggestions above. I’m here to help and get you around this issue.

I recommend contacting the IRS. This way, they’ll be able to provide you with additional information and can advise you on what’s the best action to take to resolve this.

Once everything is settled, you might want to check this link for guidance in effectively running your next payroll: Process or run payroll.

Keep me posted if you have other concerns or questions about your employee’s withholdings. I’ll be around ready to help you. Have a great day ahead!