The Firm of Gardner & Billing, CPAs PLLC

The self-employment tax is calculated as a percentage of your net self-employment earnings. In 2014, the self-employment tax amounts to 15.3 percent of net earnings and consists of two parts: 12.4 % for Social Security 2.9 % for Medicare Before you can figure your self-employment tax, you need to calculate your net self-employment earnings for the tax year. In most cases, net earnings are the same as net profit from self-employment. Net profit is calculated using income tax form Schedule C: Profit or Loss from Business. Net profit is the difference between gross income and any deductible business expenses. If your net profit is at least $400, you need to pay self-employment tax. The instructions for calculating the self-employment tax are found on IRS form Schedule SE: Self-Employment Tax: Refer to your Schedule C (or Schedule Cs if you have multiple small businesses) and enter the total amount of net profit (if less than $400, stop). Multiply that amount by 92.35 % (you...

An article from www.howstuffworks.com Being your own boss, setting your own hours, enjoying the full fruits of your labor without interference from meddling middle managers and corporate overlords — that's the self-employed dream! But there are trade-offs for all of that freedom and autonomy. The self-employment tax is a great example of one of the trade-offs that comes with working for yourself. If you get a regular paycheck from an employer, you probably noticed those deductions labeled "FICA – Social Security" and "FICA – Medicare." FICA stands for the Federal Insurance Contributions Act, which requires every American worker to pay into the Social Security and Medicare trust funds in order to claim benefits upon retirement. For 2015, the total cost of FICA contributions is 15.3 percent of earned income. If you work for someone else, your employer pays half of your FICA contributions (7.65 percent), and you're on the hook for the other half. If you are...