Career Advice

Here’s some career advice for you: become a notary public. Apart from the very cool stamps, there's another benefit to working as a notary: You don’t have to pay any self-employment tax! We get a lot of questions about self-employment tax -- properly known as SECA -- and following is a super brief rundown:

The tax rate for social security and medicare is 15.3%. When you’re an employee, your employer pays half of this (6.2% social + 1.45% medicare = 7.65%) on your behalf. But when you’re self-employed, you have to pay the whole dang thing yourself! Et voila, self-employment tax.

This is a tough sell, but the IRS does give you a couple of breaks. First, you don’t have to pay SECA on the portion that your employer would have paid had you been an employee. And, you get to take half of what you pay into SECA as an adjustment to your income. This is probably best illustrated via a colorful example: Lucy owns a lemonade stand and her income from self-employment is $100,000 (it’s very good lemonade). If Lucy were an employee, her employer would be paying 7.65% in social security and medicare tax on her behalf. So, Lucy subtracts $7,650 from $100k and is left with $92,350. She pays 15.3% of $92,350 in SECA and can then deduct 50% of this ($7064.78)  as a business expense. Pretty cool, right?

But not so fast. Those lucky notaries, they don’t have to pay any SECA tax at all! Why? Because it says so in the tax code. So, the next time mom and dad push you to become a doctor, lawyer, or engineer (or bookkeeper :) ), counter that there are tremendous advantages to hanging up your shingle as a notary, because (a) again, those stamps, people!, and (b) you’ll pay less in taxes. All that said, it should be noted that in some states fees for notary services are regulated and are capped at fairly low amounts. So...you may want to go to med school after all.

Anyone out there choosing between becoming a doctor or a notary? Please weigh in!