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Social Security Self-Employment Tax

Individuals that have 1099 wage income may face many questions regarding self-employment taxes. Uncertainties on what self-employment tax is or how much of self-employment wages can be taxed often lead to questions like the ones answered below that were answered by Experts. 

What is self-employment tax?

This is a U.S. tax that is typically set at 15.30%. This is close to the equivalent of what the usual employer and employee would pay under the Federal Insurance Contribution Act (FICA) tax. This FICA tax is a combination of two parts: 12.4% for Social Security and 2.9% for Medicare. There are limits in place that the self-employment tax applies to. For the Social Security portion, the self-employment tax only applies to the first $110,100 of income (based on the 2012 tax year). There is no limitation to the self-employment tax for the Medicare portion; it will be 2.9% on any amount. The portion that an individual pays in the self-employment tax that is normally paid by an employer is allowed as a deduction against the income. If self-employment tax liability exceeds $1,000 then the individual must pay the estimated taxes quarterly using form 1040-ES.

What is the upper income limit that can be taxed for self employment by Social Security? 

The Self-Employment tax consists of two parts – Social Security and Medicare taxes. The Social Security portion does have a limit of $106,800 of income that will be taxed. There is no limit on the income to be taxed for Medicare.

In California if an income is $12,108 in SSDI and $4,000 of self-employment income, would there be self-employment tax owed?

A person can figure out self-employment tax by multiplying the total of the self-employment income of $4,000 by 13.3%. However, this amount would depend on if work related expenses had against the $4,000 is claimed. This would be called a tax deduction.

Would a 75 year old consultant have to pay the self-employment and Social Security taxes?

Self employment tax gets paid no matter what age an individual may be or what type of the self employment is. Self-employment tax consists of two parts: Social Security Tax and Medicare tax.

If someone is receiving payments for the use of intellectual property as an author are these payments subject to Social Security tax?

Speaking in generalities, any work that an individual creates that would receive royalties on those works are subject to self-employment tax. You would report that on a 1040 Schedule C form. Any royalties from works that an individual did not create but had acquired the rights to those works would not be subject to the self-employment tax.

These questions above are just a few that people have needed answers to. Each situation is different and there may be specific details to your case that are not addressed above. Experts can help answer specific self-employment tax questions when you need them answered. Experts are available online at your convience, no need to get a costly appointment with an accountant. 

Ask a Social Security Expert

dylatess
dylatess, ATTORNEY
Category: General
Satisfied Customers: 3174
Experience:  36 plus years of SSD practice
29685164
Type Your Social Security Question Here...
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Social Security Experts are Online Now

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Social Security Experts are online & ready to help you now

dylatess
ATTORNEY
Satisfied Customers: 3096
36 plus years of SSD practice
Megan C
Certified Public Accountant (CPA)
Satisfied Customers: 3942
Licensed CPA, CMA, CFE, CGMA M.Accy Also Teach Accounting courses at Master's Level
LawTalk
Attorney
Satisfied Customers: 1138
I have 30 years of legal and litigation experience, including representing clients before the U.S. Social Security Administration.

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