Self-Employment Tax

 

IRS Definition

Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.

More from H&R Block

Self-employment tax (SE tax) is made up of Social Security and Medicare taxes. If you earn self-employment income, reported on Form 1099-MISC, you must pay a 15.3% self-employment tax.  However, if you’re classified as an employee and earn wages reported on Form W-2, your employer pays half of your SE tax (7.65%). The remaining half is usually deducted from your paycheck.

You’re considered self-employed if you own your own business or the company you work for classifies you as an independent contractor. Because tax is usually not withheld from self-employment income (nonemployee compensation), you’re required to make estimated tax payments during the year to cover your federal income tax and SE tax.

Taxpayers sometimes don’t understand this rule, and end up with a notice from the IRS.

Learn how to address an IRS CP2000 notice.

Get help from an IRS expert

H&R Block’s experts can solve any IRS problem, no matter how complex.

Make an appointment

Or call 855-536-6504

Related Information

How to Handle IRS CP2000 Notices (Underreporter Inquiry)

Learn how the IRS matches your information to generate CP2000 notices, and how to handle one of these underreporter inquiries if the IRS contacts you.

How to Get More Time to Respond to a CP2000 Notice

If you need more time to respond to an IRS CP2000 notice, ask the IRS to extend the notice deadline. Learn exactly what to do to get more time from the IRS.

How to Get Your Old IRS Forms W-2 and 1099

Need copies of your old Forms W-2 or 1099? Learn about the four different ways to obtain IRS wage and income transcripts from the tax experts at H&R Block.

Incorrect CP2000 Notices Are More Common Than You Think

Here are the five things you need to know to respond to the IRS when you get an incorrect CP2000 notice, including how and when to respond.

Power of Attorney: It’s How Your Tax Pro Deals with the IRS For You

Learn the three main benefits of engaging a power of attorney to research your IRS account and resolve your tax problems. Get the facts from the experts at H&R Block.