You Are Self-Employed! Now What?
YOU ARE SELF-EMPLOYED! Now what?
SELF-EMPLOYED PAY SELF-EMPLOYMENT TAX
If YOU ARE self employed, you must pay Self-Employment Tax aka SE tax. SE tax is Social Security and Medicare tax. You may have heard it referred to you as “FICA” which stands for Federal Insurance Contributions Act.
What you need to know about self-employment
How much is it?
Social Security Tax = 12.4 percent
Medicare Tax = 2.9 percent
TOTAL OF 15.3% OF 92.35% OF YOUR NET PROFIT
Sales = 100,000
Expenses = 50,000
Net Profit = 50,000
SE Tax = $50,000 X 92.35% = $46,175 X 15.3% = $7065
THIS IS ONLY SE TAX AND DOES NOT INCLUDE FEDERAL & STATE INCOME TAXES YOU MAY OWE BASED ON YOUR TAX SITUATION.
Who owes it?
You must pay self-employment tax and file Schedule SE if either of the following applies.
- Your net earnings from self-employment (excluding church employee income) were $400 or more.
- You had church employee income of $108.28 or more.
How do you pay it?
You pay your SE Tax by making estimated taxes. Federal & State personal taxes are a “pay as it comes” tax system, so when more money comes in, more taxes need to be withheld out! Therefore, you need to pay into these taxes on your own. You pay these taxes quarterly by filing Form 1040-ES or your states’ estimated tax forms.