What is self-employment tax?

Self-employment tax is the tax you pay if you’re self-employed. This is when a self employed individual pays Federal Insurance Contributions Act (FICA) tax, which includes Social Security and Medicare, by themselves.

The cost of this FICA tax is normally split between employer and employee. Because self-employed workers don’t have their taxes withheld by an employer, they have to pay both the employer and employee shares of the FICA tax. This is called self-employment tax.

 

Related terms:
What is sole proprietorship?
What can I write off on my taxes?

Accounting Terms

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What is self-employment tax?

Self-employment tax is the tax you pay if you’re self-employed. This is when a self employed individual pays Federal Insurance Contributions Act (FICA) tax, which includes Social Security and Medicare, by themselves.

The cost of this FICA tax is normally split between employer and employee. Because self-employed workers don’t have their taxes withheld by an employer, they have to pay both the employer and employee shares of the FICA tax. This is called self-employment tax.

 

Related terms:
What is sole proprietorship?
What can I write off on my taxes?

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