How to Pay Social Security Taxes When Self Employed. Most U.S. workers are required to pay Social Security taxes on their earned income. For most taxpayers, Social Security taxes are deducted by their employers from each paycheck. When self employed, individuals who are not otherwise subject to Social Security withholding are required to file Schedule SE with their income tax returns if they had net earnings of $400 or more when self employed.
Pay Social Security Taxes on Your Self Employed Net Earnings
Use Schedule SE to figure your Social Security and other tax liabilities for your net earnings of over $400 while self employed.
Work through the flowchart at the middle of Schedule SE's first page to determine if you may use Short Schedule SE. Most self employed taxpayers are able to use Short Schedule SE.
Enter any net farm profit or loss, from line 36 of Schedule F or box 14, code A of Schedule K-1, on line 1 of Section A-Short Schedule SE.
List your business net profit or loss on line 2. You will find this figure on line 31 of Schedule C, line 3 of Schedule C-EZ or either box 14, code A or box 9, code J1 of Schedule K-1.
Total your net business profit or loss by adding lines 1 and 2 and entering the sum on line 3.
Multiply line 3 by 92.35 percent to calculate your net earnings from self-employment. If the product is $400 or more, enter it on line 4. If it is below $400, you do not owe any self-employment tax and do not need to fill out or file Schedule SE.
Calculate your self-employment tax following the instructions for line 5 and enter your self-employment tax on line 5 and on Form 1040, line 58.
Deduct half of your self-employment tax from your Form 1040 income by entering 50 percent of the figure on line 5 on line 27 of Form 1040.
Follow instructions to fill our the Long Schedule SE if you are required to do so according to the flow chart in the middle of Schedule SE.
Pay the total "Tax you owe" figure on Form 1040 after following all steps above and in doing so you will be meeting your Social Security tax obligations.
Plan ahead to pay a self-employment tax of about 15.3 percent of your net earnings when you are self employed. This equals both the employee and the employer share for Social Security and Medicare, which are normally deducted from each side of payroll checks in the amount of 6.2 percent for Social Security (up to a ceiling), and 1.45 percent for Medicare.
Things You'll Need
Completed business or farm schedule of profit or loss such as Schedule C, C-EZ, F or K-1
IRS Schedule SE