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As an employee, you had FICA tax withheld from your wages, and your employer
matched your contribution and remitted both to the IRS. As a self-employed
person, you are required to pay both halves of those taxes, called self
employment tax.
Self-Employment Tax
Self-employment tax is based on your NET earnings from self- employment, as explained in the instructions for Schedule SE. Note, As an employee you had 7.65% withheld from your pay. However the true full rate is 15.3%. Your employer was required to pay 1/2 of the this tax. As a Self-employed your are both the employee and employer thus you must pay the full 15.3% tax. The 15.3% is broken down into two parts. Social Security and Medicare. Social Security is 6.2% for 1/2 or 12.4% full. Medicare is 1.45% for 1/2 or 2.9% full. Medicare must always be paid but social security is limited each year to a max self-employed income at which time social security is no longer due.
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Disclaimer Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein. Copyright © 2017
Wink Tax Services / Wink Inc.
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