What exactly is the self-employment tax?
It’s a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most employees. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance). But I have good news! You can deduct half of your self-employment tax in figuring your adjusted gross income when you file your Form 1040 each year. STEP TWO – Establish if you are really ‘self-employed’ According to the Internal Revenue Service, you are self-employed if any of the following apply to you. • You carry on a trade or business as a sole proprietor or an independent contractor. • You are a member of a partnership that carries on a trade or business. • You are otherwise in business for yourself. Most of the self-employed community are independent contractors, sole proprietors, and one member Limited Liabil
