
What is self-employment tax?
Self-employment tax consists of both the employee and the employer portions of Medicare and Social Security taxes. Self-employed individuals, however, are effectively both employers and employees of their businesses, so they must pay both portions. For example, when you work for someone else, they withhold what you owe in taxes from your earnings and they also pay additional taxes. When you are self-employed, there is no one else withholding these taxes and so you must pay all the taxes yourself. Additionally, you are required to file personal taxes, which may include your business taxes if those are not filed separately. Get matched with a tax pro today for affordable and fast help preparing and filing your taxes.
Who pays self-employment tax?
Almost every small business owner, entrepreneur, freelancer, and independent contractor pays self-employment tax. This is true whether your business is structured as a sole proprietorship, LLC, or a partnership where you are not a W-2 employee or receive income beyond your W-2 wages. This self-employment tax obligation applies even if you do not have a formal business entity set up for your income (for example, gig workers and those with part-time or seasonal side income).If you earn at least $400 from your self-employment, you are expected to calculate and pay self-employment tax, even if you already collect Social Security benefits. While it may seem overwhelming, a tax pro can simplify the process for you.


How do I pay self-employment tax?
Self-employed individuals are required to pay estimated quarterly taxes. Calculating how much to pay in estimated taxes can be complicated, especially for individuals who are new to the process, or had significant changes in income. Many self-employed people get help from a tax professional to learn how to estimate their taxes accurately. Form 1040-ES is designed to help individuals calculate and pay their estimated self-employment taxes. This form includes tax vouchers you can use to mail your quarterly estimated tax payments, or you may pay electronically using the Electronic Federal Tax Payment System (EFTPS).
Save money when you file self-employment taxes
Self-employment taxes are calculated based on your net profits from self-employment. Generally, you can lower your taxes by deducting your business expenses when filing your taxes. Common deductible business expenses may include:
- Office supplies, software, and equipment.
- Travel and vehicle expenses.
- Office rent and insurance.
- Legal and professional expenses.
Many other types of expenses may be deductible for your specific business. We can match you with a tax pro to analyze your expenses and deductions to save you time and money.
