If you're self-employed, you have to not only pay your own Social Security tax, but the employer's portion of the tax too. You need to use a special form to do this. Even if you don't owe any taxes because your income is too low, you will owe Social Security taxes unless you lost money or had a net income lower than $400 from self-employment, or church income lower than $108.28. Filing for this tax requires that you know your exact income and have access to the appropriate form.
Determine if you owe Social Security taxes. People who are self-employed and file schedule C, or are partners in business and file tax form 1065 but receive K-9 forms, have to calculate their taxable earnings before they can discover how much they owe in Social Security tax. Those who receive income from unreported tips or filed form 8919 showing they were an employee whose employer didn't collect Social Security also need to calculate the Social Security tax owed and pay a quarterly estimate.
Estimate what you think you'll owe in Social Security tax by multiplying the estimated income times 15.3 percent. Divide that amount by 4 and add it to your estimated tax payment every quarter. This way when tax time comes you'll have most of your tax paid.
Calculate your portion of partnership profits and create a K-9 form or complete schedule C for your personal taxes to find the amount you actually owe. Once you have this information, you have to complete a Schedule SE.
Decide whether you can file the short form version of Schedule SE or need to use the long form. The long form is for those with total self-employment income more than $106,800, who have unreported tips, who filed form 8919, who earned a non-taxable income from a religious organization or who used an optional method to calculate net earnings. All others can use the short form.
Fill out the short form of schedule SE if you qualify. Enter your self-employment income and multiply it by .9235. If it's less than $400, you don't need to file. If it's more, you then multiply that number by 0.153 to find the amount you owe. You'll need to enter 50 percent of that amount on line 27 to take the amount off your adjusted gross income. Calculating the tax on the long form involves a few extra steps depending on your situation. If you made more than $106,800, multiply the amount more than the $106,800 by 0.029 and then add $13,243.20 to find the amount you owe.
Include the Social Security tax you owe on Form 1040 on the back in the section titled "Other Taxes." Since the line number changes from year to year, it's easier finding the section. Pay the Social Security tax when you pay your federal taxes.
Items you will need
- Tax Schedule SE
- Ryan McVay/Photodisc/Getty Images
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- How to Calculate How Much You Get Back from Income Tax
- How to File Taxes Jointly While Married
- How to File Jointly as a Disabled Married Veteran
- How to Get Social Security Tax Back
- Federal Income Tax Forms: 1040EZ Instructions
- What if You Forget to Put a W-2 on Your Taxes?
- "Which Form to Use to File Federal Taxes for Self Employment Income Under $5,000"