Social Security

For most employees, social security and Medicare taxes are deducted from every paycheck, helping to provide retirement income and Medicare coverage. If you are self-employed, you pay for your coverage through the self-employment tax that you compute and pay when you file your federal income tax each year. Generally, if you carry on a trade or business as a sole proprietor, an independent contractor, a member of a partnership that carries on a trade or business, or are otherwise in business for yourself, then you are self-employed. Part-time work can qualify as self-employment even if its work you do in addition to a regular full-time job. Many self-employed people will have to make quarterly estimated tax payments. Remember, your self-employment tax will increase the total federal tax you owe. Be sure to take this into account when you determine how much estimated tax to pay each quarter. When you file your tax return, fill out Schedule SE, where you report your self-employment income and calculate the self-employment tax owed.