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Self-Employed & Sole Proprietor Business Solutions

It takes dedication to succeed as a solopreneur — but you don’t have to do it alone. Paychex Solo* is designed to help meet payroll and retirement needs of owner-only businesses (independent contractors, freelancers, and other self-employed individuals). Take advantage of all that Paychex Solo has to offer:

  • Solo 401(k) plan for significant retirement savings potential
  • Self-employed payroll and self-employed tax services to help you minimize tax liability
  • Startup and incorporation services to help establish and protect your business

Stay on Top of Your Business Needs With Paychex Solo

Incorporation and Startup Services

Paychex Solo includes your choice of two filings of any of the following services through our partner, MyCorporation®:

  • State IDs
  • Business licenses (DBA or city business license)
  • Corporate formations
  • Federal tax IDs
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Self-Employed 401(k) Services: Start Earlier and Potentially Save More

The greatest advantage of Paychex Solo for owner-only businesses is that you can make significant 401(k) contributions as both employer and employee — making the most of your retirement contribution and tax breaks on business deductions.

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Integrated Payroll Services for Self-Employed Businesses With Future Scalability

Integrating your 401(k) with payroll services means your solo 401(k) contributions are withdrawn on a pre-tax basis, allowing you to build your retirement savings while saving on federal and state taxes. If you ever decide to hire workers, our payroll software for independent contractors and solopreneurs can scale with your growing business.

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Pay Yourself Correctly: Payroll and Tax Savings

If you don’t know how to pay self-employment taxes, we can help. Paychex Solo helps you save on self-employment taxes by making it easy to pay yourself a salary and establish your business as an S Corporation. Tax benefits of becoming an S Corp:

  • Payroll taxes are taken directly from your paycheck, making them easier to manage
  • Deduct your salary to reduce your taxable income
  • You don’t have to pay Federal Insurance Contributions Act (FICA) taxes on income earned beyond your reasonable salary amount, which may be a significant savings
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Self-Employed 401(k) Plan Retirement and Payroll FAQ

  • How Do You Set Up Payroll for Sole Proprietorships or When Self-Employed?

    How Do You Set Up Payroll for Sole Proprietorships or When Self-Employed?

    Service providers such as Paychex Solo can provide you with a simple, efficient way to pay yourself wages as an employee of your own business when you’re incorporated as an LLC or S Corp. This includes options for direct deposit and helping file IRS Forms W-4 and W-2.

  • What Is the Self-Employment Tax?

    What Is the Self-Employment Tax?

    The self-employment tax is a combination of the employer and employee shares of FICA tax applying to net earnings. It helps solopreneurs build Social Security and Medicare credits.

  • How Much Are Payroll Taxes for Self-Employed Business Owners and How Do I Calculate Them?

    How Much Are Payroll Taxes for Self-Employed Business Owners and How Do I Calculate Them?

    The current self-employment payroll tax rate is 15.3% of net earnings — 12.4% for Social Security and 2.9% for Medicare. While 12.4% applies to net earnings up to the wage base for the Social Security Tax ($147,000), 2.9% has no earnings ceiling. For example:

    If:

    Revenue – Deductible expenses = $150,000

    Then:

    Self-employed payroll tax = ($147,000 x 12.4) + ($150,000 x 2.9) = $22,578

    If you earn additional wages from a job, they must also be included up to the wage ceiling for Social Security and up to the full revenue, minus deductible expenses for Medicare.

  • Are There Self-Employment Tax Deductions?

    Are There Self-Employment Tax Deductions?

    Yes, one-half of the self-employment tax is deductible from gross income, whether or not you itemize your personal deductions. It’s not subtracted from your business income.

  • What Is a Solo 401(k)?

    What Is a Solo 401(k)?

    A solo 401(k) is a retirement plan that is specifically created for a self-employed person. It offers retirement and tax-saving benefits of a 401(k) for self-employed individuals, while making it easy to establish and manage a plan. A solo 401(k) is offered as part of Paychex Solo, along with payroll and incorporation services to help you save on taxes while you save for retirement.

  • How Much Can I Contribute With a Solo 401(k)?

    How Much Can I Contribute With a Solo 401(k)?

    In 2022, an owner-only 401(k) allows you to contribute a maximum of $61,000, plus a $6,500 catch-up contribution if you are over the age of 50. This limit is the total an employee can receive from all contributions, employee and employer contributions.

  • Who Does a Solo 401(k) Cover?

    Who Does a Solo 401(k) Cover?

    A solo 401(k) may provide retirement savings for a self-employed individual and their spouse. No employees may be covered by a solo 401(k) unless they happen to be dependents of the owner.

  • Who Is Eligible for Solo 401(k), Payroll, and Incorporation Services as Part of Paychex Solo?

    Who Is Eligible for Solo 401(k), Payroll, and Incorporation Services as Part of Paychex Solo?

    If you’re self-employed, you may establish payroll and a self-employed 401(k) through Paychex Solo if you do not have any employees, are incorporated, and you meet general 401(k) plan qualification requirements. Our incorporation services can help you with the filings necessary to start the process.

  • Do I Need an EIN To Set Up a Solo 401(k) and Payroll?

    Do I Need an EIN To Set Up a Solo 401(k) and Payroll?

    Yes. Before establishing self-employed payroll and contributing to a solo 401(k), an individual must obtain an employer identification number (EIN) from the IRS. Paychex Solo includes incorporation services that can help you establish an EIN to take advantage of our solo 401(k) as well as payroll services for self-employed individuals.

  • Can I Have a Solo 401(k) if I Have Employees?

    Can I Have a Solo 401(k) if I Have Employees?

    It depends. A solo 401(k) is intended for use by a self-employed individual with no employees. However, if your spouse works for you, they would be covered under a solo 401(k) as a dependent. Children and other family members are not eligible.

  • Can a Form 1099 Independent Contractor Benefit From the Solo 401(k) in Paychex Solo?

    Can a Form 1099 Independent Contractor Benefit From the Solo 401(k) in Paychex Solo?

    Yes. Independent contractors are self-employed individuals. Everything in Paychex Solo, including the solo 401(k), was created specifically for sole proprietors like 1099 independent contractors.

  • Can a Self-Employed Person/Sole Proprietor Be on Payroll?

    Can a Self-Employed Person/Sole Proprietor Be on Payroll?

    In a sole proprietorship, personal finances and business finances are intertwined, which means all business profits pass through to you and are reported on your personal income taxes. For this reason, sole proprietors can’t put themselves on their own payroll.

  • What Percentage Should a Self-Employed Person Pay Themselves?

    What Percentage Should a Self-Employed Person Pay Themselves?

    It’s ultimately your decision, but a general rule of thumb is to pay yourself a fixed percentage of business profits. Many self-employed individuals start off by paying themselves 30% of overall net income, so if you make $200,000 in annual revenue, you would pay yourself $60,000.

  • Should LLC Members Be on Payroll?

    Should LLC Members Be on Payroll?

    If you’re an LLC owner wondering how to put yourself on payroll, note that you aren’t considered an employee of the company. This means you can’t receive compensation in the form of wages or salary.

  • Can I Do My Own Payroll for S Corp?

    Can I Do My Own Payroll for S Corp?

    S Corporations must have a payroll system in place to pay their employees and any shareholders who are considered employees. While you can do payroll yourself, this can be a time-consuming task, not to mention the associated risks you take on when doing payroll on your own. Payroll services such as Paychex Solo can help self-employed individuals and S Corps complete payroll more easily.

  • How Do I Qualify for a Self-Employed 401(k)?

    How Do I Qualify for a Self-Employed 401(k)?

    To qualify for a self-employed or solo 401(k), you must earn self-employment income and not have any full-time W-2 employees. If you’re married, you and your spouse may contribute to a solo 401(k), as long as you both make taxable income from the business.

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