If you’re a sole proprietor, freelancer, or independent contractor, then you’ll likely need to pay self-employment tax. Considered the equivalent of payroll taxes that W-2 employees pay, it’s due on income earned and must be paid regardless of whether you receive a 1099-MISC for your services. The self-employment tax rate includes both Social Security and Medicare taxes.
Self-employment tax is separate from income tax, although it’s reported on the individual income tax return. Sole proprietors and freelancers must pay both income tax and self-employment tax on their earnings.
Self-Employment Tax Calculator
Input your wages and self-employed income to calculate your total self-employment tax. Self-employment tax is calculated separately for each individual, not married couples. All income numbers input should be for an individual.
Self-employment Tax Rate Table for 2021 & 2022
Social Security Tax
12.4% on the first $142,800 of wages and self-employment (SE) income
2.9% of all wages and SE income
12.4% on the first $147,000 of wages and SE income
2.9% of all wages and SE income
The $147,000 limit (for 2022) for income subject to Social Security tax includes both income from wages and self-employment income. This tax only applies to the first $147,000 of your earned income from wages and self-employment. You won’t be charged any additional Social Security tax after that. In contrast, there’s no limit on the Medicare portion of the self-employment tax. No matter how much you earn, the Medicare tax applies to all of your wages and self-employment income.
Who Has to Pay Self-employment Tax?
Anyone who makes $400 or more in self-employment income must pay self-employment taxes. Self-employment income is any income earned by carrying on a trade or business organized as a sole proprietorship or partnership.
Here are a few examples of people subject to self-employment tax:
- A sole proprietor, which is defined as any trade or business owned by one person that isn’t organized as a limited liability company (LLC) or a corporation
- A partner in a partnership
- A member (owner) of an LLC taxed as a sole proprietorship or partnership
- An independent contractor or freelancer, such as a Lyft or Uber driver
Sole proprietors and partnerships should receive Form 1099-MISC from any business customers who pay them more than $600 during the year for services. However, the income you receive is taxable regardless of whether you receive a Form 1099-MISC.
When to Pay Self-employment Taxes
Self-employment taxes are paid quarterly throughout the year along with any estimated income tax that’s due. If you’re looking for tax software that will calculate your self-employment taxes for you as well as complete your Schedule SE and any other supplemental forms, we suggest TurboTax. You can start your return for free and pay only when you file.
Due Dates for Estimated Tax Payments for 2022
Payment Due Date
January 1 to March 31
April 1 to May 31
June 1 to August 31
September 1 to December 31
January 15, 2023
If the due date for making an estimated payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next business day.
There’s no form showing the tax calculation that’s filed on a quarterly basis. You include your estimated self-employment tax along with any estimated income tax you owe and pay it to the IRS. You can make the payment using the Electronic Federal Tax Payment System (EFTPS) or by mailing a check along with Form 1040-V, which is simply a voucher with your name, Social Security number, and the amount of the payment.
How to Report Self-employment Tax
Business owners and partners use Schedule SE to compute and report self-employment taxes annually. A Schedule SE must be completed for each spouse who has self-employment income, and it must be attached to the individual return (Form 1040). Any quarterly payments of tax made during the year will offset the self-employment tax calculated on the annual return.
Now that you understand the calculation of your self-employment tax, you can be confident in the estimation of your quarterly tax payment. Because you don’t have an employer withholding the tax from your wages, you must be disciplined in making the required quarterly payment so that you don’t fall behind and suffer underpayment penalties.