What is self employment tax?
Answer:
Self-employment taxes refer to the social security tax and Medicare taxes that must be paid on the "net" earnings of an unincorporated business by the business owner (net earnings is after deducting most business expenses). I It is paid with the owner's individual income tax return- form 1040.
Other non-business deductions cannot eliminate this tax as it is a separate tax calculation.
Explanation: When you work for someone as an employee, social security and Medicare taxes are taken out of your pay check. When you work for someone as an employee, the employer must also pay his share of social security tax and Medicare taxes.
Self-employment tax represents both amounts - the employer and employee portion of the tax.
Other non-business deductions cannot eliminate this tax as it is a separate tax calculation.
Explanation: When you work for someone as an employee, social security and Medicare taxes are taken out of your pay check. When you work for someone as an employee, the employer must also pay his share of social security tax and Medicare taxes.
Self-employment tax represents both amounts - the employer and employee portion of the tax.
