SteveSy wrote:$891,000 in taxes on more than $2 million
People ought to almost puke at the amount this guy owes. That's almost 50% of his total earnings, he surely had expenses, probably making it more than 60%+. Then I'm sure Hawaii is also collecting on that income probably taking it up to around 80%+.
I haven't read the details on the guy. I would suspect that the above figure includes penalties and interest.
Here's why.
Worst case scenario, if you had a W-2 with gross wages of $2,000,000
for the year 2007 alone (i.e., all the income piled into one year), single individual, 25 years old, no dependents, nothing special, your federal income tax would be (my rough calculation) $676,805, which is an effective rate of about 33.8%. Add $6,045 in Social Security tax and $29,000 in Medicare tax, you have $711,850 in federal taxes -- so an effective rate of about 35.6%.
Assuming, instead, $2,000,000 in net earnings from self-employment (i.e., an independent contractor) for 2007 (this is NET -- after the business deductions), that comes to $665,316 in federal income tax, for an effective rate of about 33.3%. Add self-employment tax of $65,653, you come to total tax of $730,969, or an over all effective rate of about 36.5%.
If you spread that $2,000,000 out over five years, the taxes would be somewhat lower. So, I think the figure SteveSy is quoting may include penalties and interest.
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