Do I have to pay self employment tax?
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| If you had net earnings from
self employment of $400 or more you are probably liable to the IRS for
self employment tax. Net earnings are calculated by subtracting ordinary and necessary
trade or business expenses from your total self employment income. You are
self employed
for this purpose if you are a sole proprietor, an independent contractor, a member of a
partnership, or are otherwise in business for yourself. You can be liable for paying
self employment tax to the IRS even if you are currently receiving Social Security benefits. If
you had a small profit or net loss from your business but want to pay into the Social
Security system, you may be eligible to file Form 1040, Schedule SE and use one of the
two optional methods to compute your net earnings from self employment. See
IRS Publication 533, Self-Employment
Tax, to see if you qualify to use an optional method. This method may also allow you
to qualify for the Earned Income Tax Credit or the Child and Dependent Care
Tax Credit.
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| Maximum Wages Subject to Social Security
tax |
$106,800.00 |
| Social Security
tax rate (Employee) |
4.20% |
| Maximum Social Security
tax (Employee) |
$4,486.00 |
| Social Security
tax rate (Employer) |
6.20% |
| Maximum Social Security
tax (Employer) |
$6,621.00 |
| Social Security
tax rate (Self Employed) 1 |
10.40% |
| Maximum Social Security
tax (Self Employed) 1 |
$11,107.00 |
| Maximum Wages Subject to Medicare
tax |
Unlimited |
| Medicare tax
rate (Employee) |
1.45% |
| Medicare tax
rate (Employer) |
1.45% |
| Medicare tax
rate (Self Employed) |
2.90% |
Footnotes:
1 Self employed persons are entitled to deduct one-half of their self
employment tax on Line 27 of Form 1040. |
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| Self employment tax is computed on Schedule SE of
Form 1040 and reported on line 56 of Form 1040. You are also entitled to an income adjustment in figuring adjusted gross
income equal to one-half of
your self employment tax for the year on line 27 of Form 1040. If you are an employee of a church or qualified church-controlled organization
that elected tax exemption from Social Security tax and Medicare tax, you must pay
self employment tax if you are paid $108.28 or more in a tax year. If you are required to pay
self employment tax, you must file Form 1040 and attach Schedule SE. For more information
on church related income and self employment tax see IRS Publication 517.
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Related tax
information about self employment tax |
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|
Is income from a sole proprietorship
taxable?
Is income from a part time business taxable?
Is the income of an independent
contractor taxable?
Employee or independent contractor?
Is income from my hobby taxable?
Are hobby losses tax deductible?
Clergy
Home Office Tax Deductions
Is partnership income taxable?
Income Related Questions and Answers |
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IRS publications about self employment tax:
For additional information about self employment tax refer to
IRS Publication 533, Self-Employment
Tax, and
IRS Publication 334, Tax
Guide for Small Business. Also see
IRS Publication 17, Your Federal
Income Tax. |
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Ask Julian Block your IRS and tax questions! |
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If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
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