Self Employment
For 2009, the maximum amount of self-employment income subject to social security tax is $102,000 (subeject
to change for 2010).
How do justify if you are selfeployed?
---Carry on a trade or business
---Are an indepedent contractor,
---A menmber of a partnership, or
---Are in business for yourself
Use Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment. The Social
Security Administration uses the information from Schedule SE to figure your benefits under the social security program. This tax applies
no matter how old you are and even if you are already getting social security or Medicare benefits.
What that means is that if you are not currently an employee for a company, meaning the
company you are working for is not paying into your social security benefits, then as a taxpayer you are
responisble on a two tier basis. What that means is that if you were working for a company that paid into your
social security,the company would pay half, and you as an employee would pay the other half. However, if
you work for a company that does not pay into soical secrity, you have to pay in full your social security
benefits.This actually makes you 100% responsible for keeping track of what you owe for the money you earned.
However, you do get a 50% deduction for one-half of self employement tax that is shown
on the front page of 1040 line 27 as a deduction from your income. So although you are 100% responsible for
keeping track of what you owe for receiving income you still get a 50% deduction of self employment
tax.
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Tax Topics
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