When you work for a company, your employer pays a portion of your Social Security and Medicare taxes. However, when you are self-employed, you are responsible for paying the “employer” portion of those taxes. Self-employment tax (SE tax) is used to collect those Social Security and Medicare taxes from self-employed individuals.
Here’s what you need to know:
- If you earn more than $400 in a year from self-employment activities, you are required to pay SE tax.
- Most church employees are required to pay self-employment tax. Any church employee who earns income of at least $108.28 must pay SE tax.
- The “employer-equivalent” portion of your SE tax can be deducted when figuring your adjusted gross income. This decreases your income tax but not your self-employment tax.
- You can pay your SE tax along with your income tax via estimated tax payments.
If you have questions or concerns regarding self-employment tax, be sure to ask! At Taxation Solutions, Inc., our team of professionals has more than 40 years of experience providing all types of tax help. We are standing by to help take the stress and hassle out of tax problems large and small, so contact us today.