Self Employment Tax tips
How is the self employment tax paid?
The self employment tax you owe is not paid directly to the government. Instead the self employment tax is handled as part of your income tax, unlike tax withholdings reported on W-2 forms and certified on W-4 forms. If you have to pay self employment tax, you must file a tax form 1040 with schedule SE attached even if you do not otherwise have to file a federal income tax return.
How to calculate self employment tax?
You figure your self employment tax using the IRS schedule SE. The self employment tax is similar to the social security tax and Medicare tax withheld from an employee's wages. The tax covers both employer and employee contributions. In comparison, an employee only has to pay one portion and the employer contributes the rest. However, for a self employed person, he or she has to pay both portions of the contributions.
How to report self employment income?
If you are only reporting self employment income, you may use section A of Schedule SE which is the short worksheet. If you have both self employment and salary income from an employer, you need to use section B of schedule SE (the long form). The long form will help you adjust social security and medicate taxes that have already been withheld by your employer. Your employer reports these amounts on your w-2. The totals of amounts from boxes 3 and 7 of your w-2 forms are entered on line 8a of the schedule SE.
The self employment tax form line 5 of section a of schedule SE or form line 12 o f section B of schedule Se is entered on line 58 of form 1040.
The self employment tax is figured on the total of all your income from self employment. That includes part time and fill time self employment activities. You are n your spouse must file separate schedule SEs if you both have self employment income even if you are married filing jointly.