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Social Security Tax For Self Employed

Refund Of Taxes Withheld In Error

Self-Employed Workers, Independent Contractors Must Pay Social Security Taxes

If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund.

If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement. Attach the following items to Form 843:

  • A copy of your Form W-2 to prove the amount of social security and Medicare taxes withheld,
  • A copy of the page from your passport showing the visa stamp,
  • If applicable INS Form I-538, Certification by Designated School Official, and
  • A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or that you authorized your employer to claim. If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer.

What You Need Know If Youre Self Employed:

  • Instead of withholding Social Security taxes from each paycheckyou pay all the Social Security taxes on your earnings when you file your annual federal income tax return.
  • Self-employed individuals earn Social Security work credits the same way employees do and qualify for benefits based on their work credits and earnings.
  • How much you pay in Social Security taxes is based on net income.
  • Deductions that you claim can make your taxable income substantially lower, but it can also potentially decrease your Social Security benefits later.
  • Your Social Security benefit payment is calculated based on your 35 highest-earning years.
  • If you earned $400 or less, Social Security taxes will be waived.

When Do You Pay Self

Most self-employed taxpayers pay quarterly taxes, which involves paying approximately one-fourth of the amount of tax that will be due for the tax year at the end of each quarter. This eliminates the need to pay a larger lump sum when filing a tax return for the year and avoid being assessed a penalty for underpayment. Self-employment tax is just one type of tax that is paid in quarterly installments. Self-employed taxpayers make estimated tax payments on all taxes that will be owed, including self-employment tax, income tax and any alternative minimum tax to be assessed.

As a general rule, quarterly tax payments are due by the 15th of the month following the close of each quarter. For instance, the first quarter of the year runs from January 1 through March 31, and quarterly tax payments for that period must be sent to the IRS by April 15. Essentially, one-fourth of the tax that will be due for the year should be paid on April 15, June 15, September 15 and January 15 of the following tax year.

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Income Taxes And Your Social Security Benefit

Some of you have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits .

You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service rules. If you:

  • file a federal tax return as an “individual” and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
  • file a joint return, and you and your spouse have a combined income* that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits may be taxable.
  • are married and file a separate tax return, you probably will pay taxes on your benefits.
  • What Are Estimated Taxes


    Some people confuse self-employment tax with estimated taxes, which are more properly called estimated tax payments. Whatever you call them, they arent a different or separate tax, but merely how you pay your self-employment and income taxes all year long. Remember, taxes are pay-as-you-go, and estimated tax payments are how you pay as you go. See Estimated Tax Payments for more details about how the payments work.

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    Whats The State Income Tax Rate In Kentucky

    Kentucky has a flat income tax rate. There are no Kentucky tax brackets.

    Through 2022, the Kentucky income tax rate is 5%. Starting in 2023, the state income tax rate drops to 4.5%.

    Like your federal income tax return and state income taxes, you are allowed to claim business expenses, personal deductions, and state tax credits.

    If you have low to moderate income, you may also qualify for the family size tax credit based on the number of members in your household.

    How Can I Avoid Paying Taxes On Social Security

    If you are earning money in retirement, you may have to pay taxes on your Social Security benefits. If you earn between $25,000 and $34,000 as an individual, you may have to pay up to 50% in taxes on your Social Security benefits. If you earn more than $34,000, you may have to pay up to 85%. To minimize the tax, you can earn less, move income-generating assets into an IRA, minimize withdrawals from retirement plans, and donate your required minimum distribution.

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    Irs Reminder: For Many Employers And Self

  • IRS Statements and Announcements
  • IR-2022-220, December 14, 2022

    WASHINGTON The Internal Revenue Service today reminded employers and self-employed individuals that chose to defer paying part of their 2020 Social Security tax liability that their second annual installment of the deferred amount is due on December 31, 2022.

    As part of the COVID relief provided during 2020, employers could choose to put off paying the employer’s share of their Social Security tax liability, which is 6.2% of wages. Self-employed individuals could also choose to defer a similar amount of their self-employment tax. Generally, half of that deferral was due on December 31, 2021. The other half is due on December 31, 2022.

    Earlier this fall, the IRS sent reminder notices to affected employers and self-employed individuals. The agency noted, however, that those affected are still required to make the payment on time, even if they did not receive a notice.

    What Are The Typical Withholdings And Basic Tax Rates

    How to Fill out Schedule SE (IRS Form 1040)

    Typically, an employer contributes 6.2 percent of your income into Social Security and 1.45 percent into Medicare. Through your withholdings, you pay an additional 6.2 percent of Social Security tax plus another 1.45 percent of your income for Medicare. Generally, your employer will deduct these amounts from your paycheck and forward them to the government along with its own contribution.

    When youre self-employed, however, the task of payingas well as paying the full amount of the taxesshifts entirely onto your shoulders. Currently, that means you have to pay 12.4 percent for Social Security and 2.9 percent for Medicaid. If you earn more than $200,000, for taxpayers filing as single, or $250,000, for married taxpayers filing jointly, youll have to pay an extra 0.9 percent for Medicare. In general, none of these taxes are considered deductible from your overall business overhead. This is the self-employment tax, and it does not take into account federal or state income taxes.

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    Who Is Required To Pay Self

    The IRS considers a self-employed individual to fall under one of three categories, including:

    • An independent contractor or sole proprietor carrying on a business or trade.
    • A member of a partnership that carries on a business or a trade.
    • Individuals otherwise in business for themselves, even if the business is part-time only.

    Traditional employees split the 15.3% total cost for Social Security and Medicare tax with their employers. Self-employed taxpayers are responsible for the full amount.

    Taxpayers with net earnings from self-employment totaling $400 or more during the year must pay self-employment tax and file a Schedule SE . Taxpayers with church employee income must pay SE tax and file Schedule SE once they earn $108.28. Rules regarding self-employment tax are applicable to all taxpayers, regardless of age, even those taxpayers who are already receiving benefits from Social Security and/or Medicare. Taxpayers must have a Social Security number or individual taxpayer identification number in order to pay SE tax.

    In general, net earnings from all self-employment activity are subject to the SE tax. Most self-employed independent contractors and sole proprietors use Schedule C to figure their earnings from self-employment activity. Prior to figuring net earnings, the taxpayer generally needs to figure the amount of total earnings that are subject to SE tax.

    How To File Self Employee Social Security Tax

    I have searched the directory and couldn’t find any pertinent information in the top results, so I am posting here:

    I’ve worked for Uber Eats part time for three years. I’m a totally disabled veteran incapable of holding down full time employment.

    After the first year of work, I was told I owed Social Security tax. So I made payment arrangements and paid them over time. It was like $600.

    I’ve heard nothing from no one since then. I assume I owe taxes for 2021 and 2022 but I have no idea how to pay them and I don’t remember who contacted me previously. I have filed annual tax returns, though I owed nothing after deducting self employment expenses, and I never heard anything back from anyone about them. I followed the complicated guidelines for disabled people returning to work when I started . But no one there ever told me anything about paying Social Security taxes.

    Also, I’ve heard that I have to file quarterly taxes. Is this true? Annual returns won’t suffice?

    So, eli5, how do I find out how much Social Security tax I owe and how do I pay them? Also, do I really have to file quarterly taxes?

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    How Do I Making My Tax Payments

    Because youre self-employed, youll be expected to pay estimated taxes each quarter, as well as filing your annual return. Your quarterly estimated tax payments should include amounts to cover both your Social Security and Medicare tax obligations, as well as your estimated income tax bill. You can estimate the taxes due using the previous years return as long as you pay estimated taxes at least equal to your previous years tax obligation, you shouldnt owe any penalties. Estimated taxes are filed using Form 1040ESEstimated Tax for Individuals. This form includes vouchers that you can print off and use to mail in your estimated tax payments throughout the year. You can also pay your taxes online with the Electronic Federal Tax Payment System, provided by the IRS.

    As the year progresses, you need to make sure that your actual earnings match the projections you made in determining your estimated tax obligation. If youre making less than you anticipated, and hence overpaying estimated taxes, then generally the government wants you to continue making the payments as you predicted. But if youre making much more than you projected, you must make arrangements to make up the difference as soon as possible. Even if you make quarterly payments, you could be penalized if you pay less than 90 percent of the current years earnings and you also pay less than 100 percent of last years earnings.

    Does Kentucky Have A Tax On Corporations And Llcs

    How Social Security Works for the Self

    Kentucky has two business taxes.

    First, there is a 5% corporate income tax on a corporations net profit. Similarly to the personal income tax, it is a flat tax with no tax brackets.

    Second, there is a Limited Liability Entity Tax. This tax will usually be a flat $175 per year unless your business has more than $3 million in gross receipts.

    The Limited Liability Entity Tax applies to C-corporations, S-corporations, LLCs, and other business types with limited liability protection under Kentucky law. It does not matter if the business is a pass-through entity.

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    The Deductible Part Of Self

    Good news: Half of your self-employment tax is a deduction in and of itself.

    If you recall, employers are permitted to write-off their portion of FICA since itâs essentially an added cost of having employees. In the same vein, the additional 7.65% freelancers pay to be their own boss is an eligible write-off against their income taxes. Youâd forgotten about income taxes for a second, huh? Your business income is subject to bothincome and SE tax.

    In general, this isn’t great. Say you’re in the bottom income tax bracket, the 10% bracket. To find out your total tax liability from both income and SE tax, you’d add that 10% to the 15.3% you’re paying in SE tax â resulting in 25.3%. That’s just over a fourth of your total income!

    Luckily, the employer portion of your SE tax can be used to reduce your income taxes. Youâll deduct half when you fill out Schedule SE.

    A Beginner’s Guide To Self

    Sarah is a staff writer at Keeper and has her Enrolled Agent license with the IRS. In 2022, she was named one of CPA Practice Advisorâs 20 Under 40 Top Influencers in the field of accounting. Her work has been featured in Business Insider, Money Under 30, Best Life, GOBankingRates, and Shopify. Sarah has nearly a decade of public accounting experience, and has worked with clients in a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce. Sarah has extensive experience offering strategic tax planning at the state and federal level. During her time in industry, she handled tax returns for C corps, S corps, partnerships, nonprofits, and sole proprietorships. Sarah is a member of the National Association of Enrolled Agents and maintains her continuing education requirements by completing over 30 hours of tax training every year. In her spare time, she is a devoted cat mom and enjoys hiking, painting, and overwatering her houseplants.

    Few people can say they like the 9-to-5 workweek. Itâs rigid, inflexible, and, unmercifully, falls over the most natural time for humans to sleep: the afternoon siesta.

    Consequently, more and more people are considering independent work. Flexible hours, no boss, no dress code â just you and the wide-open playing field. Whatâs not to love? Iâm sorry you asked. Iâd like to introduce you to self-employment tax.


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    How Do I Calculate My Self

    Determine your net earnings for the year using IRS Schedule C. Enter your gross earnings on the form, and then subtract all deductions, such as business expenses.

    Next, use IRS Schedule SE to figure the tax due on your net earnings from self-employment. Before you calculate the tax, the IRS allows you to deduct 7.65 percent of your net earnings, reducing the amount you will have to pay.

    Example Of Social Security Taxes

    How To Calculate Federal Income Taxes – Social Security & Medicare Included

    The Social Security tax is a regressive tax, meaning that a larger portion of lower-income earners’ total income is withheld, compared with that of higher-income earners. Consider two employees, Izzy and Jacob. Izzy earns $85,000 for the tax year 2022 and has a 6.2% Social Security tax withheld from his pay. The federal government, in effect, collects 6.2% x $85,000 = $5,270 from Izzy to help pay for retirement and disability benefits.

    Jacob, on the other hand, earns $175,000 for the tax year 2022. The Social Security tax rate will only be applied up to the limit of $147,000.

    Therefore, Jacob will pay 6.2% x $147,000 = $9,114 as his contribution to the countrys Social Security account for older people and people with disabilities, but his effective Social Security tax rate is $9,114 ÷ $175,000 = 5.2%. Izzy, with a lower income per annum, is effectively taxed at 6.2% .

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    How Much Control Do You Want

    As we don’t know what Social Security benefit payments will look like in the futuremany people expect them to be lower because of how the system is fundedyou may want to go with the sure thing and take the lower tax liability today. After all, one way to lower your tax liability is to take money out of your business and put it in one of the available retirement plans for the self-employed. That’s money you’ll have a lot more control over than Social Security benefits.

    “The great thing about Social Security is you cannot access it until retirement age,” says Kevin Michels, CFP, EA, financial planner and president of Medicus Wealth Planning.

    “You can’t make early withdrawals, you can’t skip payments, and you are guaranteed a benefit,” Michels adds. “However, you have only a small say in the future legislation of Social Security and how it will be affected by the mismanagement of government funds.”

    Michels continues, saying the following:

    If you have trouble saving for retirement already, then paying into Social Security may be the better option. If you are confident you can stick to a savings plan, invest wisely, and not touch your savings until retirement, it may be a better idea to minimize what you pay into Social Security and take more responsibility for your retirement.

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