The Pain of Taxation

I just sent $865.96 of my hard-earned money to the United States Government. Then I sent $246.60 to the State of Illinois. I feel pretty stupid about it, but it has to be done. In fact, it has to be done several times a year.

I incorporated my software consulting business a few years ago, so I have to pay my own payroll taxes. It works like this: I do the work. People pay me with checks I deposit in the corporate bank account. Every now and then, I want to move some of that money from the corporate bank account to my personal bank account. I track both accounts on my computer using Intuit’s Quicken and Quickbooks software, and both accounts are at the same bank. But when I want to move money from one account to the other, I have to send some of my money to the government.

When you work an ordinary job, all this happens behind the scenes. You get your paycheck and you see that some money has been taken out, withholding it’s called, but there’s still plenty of money for you. It’s relatively painless.

But when you run an incorporated business, you see behind the scenes. That money that gets taken out of the paycheck? I have to do that myself. I issue myself paychecks, with deductions for federal and state income tax withholding and for social security and medicare (sometimes called FICA).

There are also amounts the employer has to pay but which aren’t taken out of the paycheck. First, there’s social security and medicare, where the employer has to match what the employee had to pay. This means the government gets twice what you see on your paycheck for these items. Then—and this just kills me—there’s unemployment insurance. That’s right, I had to set aside $206.52 for unemployment insurance in case I decide to lay myself off.

Then comes the hard part. I have to take all that money and send it to the government.

It hurts. It hurts a lot.