Self Employment Tax

Self-employment tax (SE tax) is comprised of Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the wages of employees who receive a Form W-2.

You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies:

  1. Your net earnings from self-employment (excluding church employee income) were $400 or more.
  2. You had church employee income of $108.28 or more.

The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits.

Social security coverage. Social security benefits are available to self-employed persons just as they are to wage earners. Your payments of SE tax contribute to your coverage under the Social Security system. Social Security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. By not reporting all of your self-employment income, you could cause your Social Security benefits to be lower when you retire.

For more information see IRS Publication 334 Tax Guide for Small Business.

To report your self-employment income in the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then choose Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand the category and then click Business income or loss from a sole proprietorship
  3. Click +Add Federal Schedule C to create a new copy of the form or click Review to review a form already created
  4. The program will proceed with the interview questions for you to enter or review the appropriate information

After you have entered your self-employment income, use the following steps to view your self-employment tax:

  1. Click Federal. On smaller devices, click in the upper left-hand corner, then choose Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand the category, then click [Your Name] Self-Employment Tax
  3. The following screen will show the self-employment tax figured based on your business income entries

Note. Statutory employees report their wages, other income, and allowable expenses on Schedule C (Form 1040). They are not liable for self-employment tax because their employers must treat them as employees for social security tax purposes. By inputting the data on Form W-2, and checking the Statutory Employee box in Box 13, the TaxAct program will automatically transfer the information to Schedule C.