The Self-Employment Tax is the tax a self-employed individual pays on net earnings from self-employment in lieu of the social security tax and Medicare tax paid by both employers and employees on employee compensation. A self-employed individual could own a business as a sole proprietor, or as a partner or could be an employee of a company who earns additional income by providing services or selling a product part-time. Earnings as an employee are not subject to Self-Employment Tax, nor is income from investments, rental property, alimony, social security or other sources of income not generated by personal services or from unincorporated businesses of the taxpayer. This tax is computed on Form 1040 Schedule SE annually for each self-employed individual. Although this tax is computed annually, it is subject to the estimated tax requirements for individuals computed and paid quarterly on Form 1040-ES. This tax, those to whom it applies, current tax rates for this tax, and the process for its calculation are thoroughly explained by the IRS at this link for Self-Employment Tax.
Roy & Associates, PC serves clients in western Pennsylvania located predominantly in Westmoreland County, Allegheny County, and Fayette County.