Self-employment tax consists of Social Security and Medicare taxes for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld by an employer for a wage earner. Employees who receive a W-2 only pay half of the total Social Security (6.2%) and Medicare (1.45%) taxes, while their employer is responsible for paying the other half. Self-employed individuals are responsible for paying both portions of the Social Security (12.4%) and Medicare (2.9%) taxes.
If you (1) are self-employed as a sole proprietorship, an independent contractor, freelancer, or earn income from a side job, and (2) earn $400 or more, you may need to pay SE tax. This is true even if you are paid in cash and do not receive a 1099-MISC. Keep in mind, you may be able to offset this income if you have qualifying expenses.
Taxes must be paid on income as you earn it. If you do not pay enough tax throughout the year, you could be assessed penalties. This is true even if you get a refund at tax time.