Self-Employment Tax

Tax Basics: Self-Employment Tax

This article was last edited on 08/20/2019. For updated information on self-employment tax, visit Self-Employment Tax (Social Security and Medicare Taxes).

If you make $400 or more working for yourself (as a sole-proprietor, owner in a partnership, or independent contractor), you may be subject to self-employment tax.

The self-employment tax is Social Security and Medicare taxes paid by people who work primarily for themselves. As an employee, your employer withholds these taxes from your paycheck and also pays a portion themselves.

But, when you work for yourself, you’re responsible for paying both the portions of those taxes. That means you’ll pay a total of 15.3% in self-employment taxes from your net earnings (2.9% for Medicare and 12.4% for Social Security). For tax year 2019, you’ll only pay Social Security taxes on the first $132,900 you make.

How do I report and pay my self-employment tax?

To determine how much self-employment tax you owe, file form Schedule SE (Form 1040). The Social Security Administration (SSA) will use this information to determine your Social Security benefits.

You may need to pay these taxes quarterly. You’re required to make quarterly estimated tax payments if

  • you expect to owe $1,000 or more in federal taxes, and
  • your withholding will be less than the smaller of
    • 90% of the tax shown on your current year’s tax return or
    • 100% of your previous year’s tax return.

You can pay your quarterly estimated taxes online or by mailing a check or money order with a payment voucher, which is included on Form 1040-ES.

Quarterly tax payments are due

  • April 15
  • June 15
  • September 15
  • January 15

Read also: Tax Quarters: Do I Need to Pay Estimated Taxes and When?