Self-Employment Tax (Schedule SE): Who Qualifies and What You Get
Learn how to manage your tax obligations if you earn money as a freelancer or independent contractor in the United States.
Self-employment tax is a way for people who work for themselves to pay into Social Security and Medicare.
Who it's for
This is for freelancers and anyone working independently who has net earnings of $400 or more.
What you get
By paying this tax, you fulfill your legal obligations to the Social Security and Medicare systems. This ensures you are contributing to the national programs that provide benefits for retirees and people with disabilities.
What it costs you
You are responsible for paying a tax rate of 15.3% on your earnings. Because you do not have an employer to withhold these funds from your paycheck, you are required to make estimated tax payments throughout the year.
The catch to know
If you wait until the end of the year to pay everything at once, you might be hit with underpayment penalties. It is important to stay on top of your quarterly payments to avoid extra costs.
How to apply
- Track your business income and expenses throughout the year.
- Calculate your net earnings from your business activities.
- Make estimated tax payments on a quarterly basis.
- File your taxes using the official government portal: https://www.irs.gov