Self-Employment Tax (Schedule SE)

Definition:

A social security and Medicare tax primarily for individuals who work for themselves. It's similar to the social security and Medicare taxes withheld from the pay of most wage earners.

If you’re a sole proprietor, every year you must file Schedule C (Profit or Loss From Business) with your Form 1040 (U.S. Individual Income Tax Return) to report your business’s net profit and loss. You also must file Schedule SE (Self-Employment Tax) with your 1040if your net earnings from self-employment were $400 or more. The self-employment tax rate is 15.3%. The rate consists of two parts:12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

You can deduct half of your SE tax when figuring your adjusted gross income. This deduction only affects your income tax. It does not affect either your net earnings from self-employment or your SE tax.

If you’re a calendar-year taxpayer, your tax filing date is April 15. Fiscal-year taxpayers must file their returns no later than the 15th day of the fourth month after the end of their tax year.

Related Content

Product Development

The overall process of strategy, organization, concept generation, product and marketing plan creation and evaluation, and commercialization of a new product

Exit Interview

The formal conversation that takes place between an employee and an HR or other manager to determine the reason(s) the employee is leaving

Primary Market Research

Iinformation that comes directly from the source--that is, potential customers. You can compile this information yourself or hire someone else to gather it for you via surveys, focus groups and other methods.

Credit Policy

Guidelines that spell out how to decide which customers are sold on open account, the exact payment terms, the limits set on outstanding balances and how to deal with delinquent accounts

Mergers

The combination of one or more corporations, LLCs, or other business entities into a single business entity; the joining of two or more companies to achieve greater efficiencies of scale and productivity

Subchapter S Corporation

A special form of corporation that allows the protection of limited liability but direct flow-through of profits and losses