QandAs: Legal

What is Self-Employment Tax?

Answer:
Self-employment tax is a social security

and Medicare tax for imposed upon individuals who are self-employed. If an individual is paid by an employer, social security taxes and Medicare taxes will be figured and withheld by the employer.

The self-employment tax rate is approximately 15%. About 12% is for the social security portion of taxes, and almost 3% is for Medicare taxes. (Check with your accountant or tax attorney for the most current self-employment tax rates.)

You must have a social security number or a taxpayer identification number to pay self-employment tax. If you earn income during the year, you generally have to make estimated tax payments on a quarterly basis, if you expect to owe taxes. (Check with your accountant or tax attorney to make sure your self-employment tax is being paid properly.)