Self Employment Tax Explained

Self-employment tax is the federal payroll tax system that applies to net earnings from self-employment. For many sole proprietors, freelancers, and independent contractors, it covers both the employee and employer portions of Social Security and Medicare that W-2 workers split with employers through FICA withholding.

The IRS generally uses Schedule SE (Form 1040) to compute self-employment tax on net profit from a trade or business. Only net earnings above certain thresholds are subject to the tax, and the Social Security portion applies up to an annual wage base published by the IRS for each tax year.

Self-employment tax is separate from federal income tax. A planning estimate usually includes both: self-employment tax on net self-employment earnings and income tax on taxable income after deductions. TaxChecker's Self-Employed Tax Calculator models both components using documented IRS constants for the labeled tax year.

Quarterly estimated payments often matter for self-employed taxpayers because income tax and self-employment tax may not be withheld from business deposits. The Quarterly Tax Calculator can help translate an annual federal estimate into Form 1040-ES style payment planning amounts.

This article is educational federal reference material. It does not determine whether you owe a specific amount, how you should file, or whether your activity is correctly classified. Consult a qualified tax professional for your situation.