Everyone who earns income pays federal income tax and, if applicable, state income tax. On top of that, self-employed individuals, like notaries, must also pay a third tax: the self-employment tax. This tax is 15.3% and covers Social Security and Medicare taxes, which would normally be withheld from your paycheck if you were an employee.
However, notaries have a unique advantage when it comes to reducing their self-employment tax. According to IRS rules (see IRS Publication 334 - Notary Public), the fees notaries earn from performing notarial acts are not subject to self-employment tax. This can significantly lower the amount of self-employment tax you owe.
In most cases, your notarial income can reduce your self-employment tax by as much as 75%. For example, if you make $30,000 in profit and 75% of that comes from notarial acts, you would save $3,442.50 in self-employment tax ($30,000 x 15.3% x 75%).
MyNotaryBusiness tracks this information for you and reports it in a way that makes tax filing easier for your accountant. It’s important to note that notarial fees are different from tax deductions, and they are also separate from what you earn for completing a signing. Tracking and reporting these fees correctly is essential, as incorrect reporting could result in overpaying thousands of dollars in taxes.