What is Self-Employment Tax?

What Is Self-Employment Tax?

Self-employment tax is a tax consisting of Social Security and Medicare taxes, primarily for individuals who work for themselves as independent contractors. Independent contractors are considered a small business operation in the eyes of the IRS. These taxes are similar to the Social Security and Medicare taxes withheld from the pay of most W-2 wage earners.

Social Security and Medicare taxes of most wage earners are figured by their employers. But independent contractors will have to figure out their own taxes using the self-employment (SE) form (Schedule SE, Form 1040) that is based on the profits of the company. Also you can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income on your personal tax return. W-2 wage earners cannot deduct Social Security and Medicare taxes on their personal tax returns. This is an IRS rule for the self-employed workers only.

Self-Employment Tax Rate

The self-employment tax rate is 15.3 percent. The rate consists of two parts: 12.4 percent for Social Security (old age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance).

The amount for 2019 is $132,900. (For SE tax rates for a prior year, refer to the Schedule SE for that year).

Get In Touch

At RMH Tax & Financial Advisors, Inc., we've been serving the needs of Plymouth, MN and the surrounding areas for years. If you need help managing any aspect of your home or business's finances, we want to hear from you.

Please fill out this form and let us know how we can be of service. We will happily offer you a FREE initial consultation to determine how we can best serve you.

Thank you for visiting. We look forward to working together!

RMH Tax & Financial Advisors, Inc.

12805 Highway 55, Suite 412,
Plymouth, MN 55441
T: (763) 557-2818
E: bobh@rmhtax.com

Connect

Facebook  LinkedIn  Twitter 

© 2021

Search  Site Map  Privacy Policy  Disclaimer
Back to top

Get In Touch

Client Portal Login

Subscribe to our Newsletter