Terry,

It would be more accurate to say that all income is potentially taxable :)

We have something similar to what you are describing. The income all gets reported, and deductions and allowances are taken off that amount, to come up with a bottom line "Taxable Income"

Some people are not even required to file a return because of this...

However, there is more than one type of tax. A self-employed person (like the contractor who started this thread) has to pay Self-Employment Tax on the S/E income, after deducting any valid business expenses. This tax is not reduced by the personal exemptions and personal deductions which are used to reduce Income Tax.

The S/E Taxes are a part of our social security and Medicare system. Employees have these types of taxes deducted right off the top of their checks, and the employer has to match them.

Too much info? :)

>Steve, is that true in the States that All income is taxable? In the UK we have a "Tax Allowance", depending on marital status, children and other stuff, whereby the first so-many pounds are free. e.g. If your allowance is, say, £4,500, and you earn £30,000, then you're only taxed on £25,500. If, heaven forfend, you only earn £4,500 or less then you're stopped no tax.
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>For employees we have PAYE (Pay as you earn), where tax is deducted from each salary payment. The allowance is divided into 12 equal parts (for monthly salaries, that is) and each is subtracted from each gross pay, then you're taxed from the remainder.
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>Contractors and self-employed still have the old shoe-box search once a year though! :-)
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>Just chatter! :-)
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