Social Security for Self-Employed People

If you work for an employer and pay into social security, your employer may cut the social security taxes from your salary and send them to the IRS to report your wages. For 2022, the Social and Medicare tax rate for self-employed people is 6.2% and 1.45%, respectively.

If, however, you’re self-employed, you need to directly report your earnings to the IRS and pay your social security taxes yourself. The amount of taxes a person pays helps the SSA determine their eligibility for social security benefits when they apply.

How Does it Work for the Self-Employed?

If a person operates a business, profession, or trade independently or as a partner, they’re self-employed.

Since self-employed people typically don’t regularly get their paychecks, they’re required to pay social security taxes when filing their annual federal income tax returns.

What the Self-Employment Tax Entails


Self-Employment Tax or IRS Schedule SE is when a person reports their business’s Schedule C net losses or profits. Your self-employment tax includes both the employer’s and employee’s social security (i.e., 6.2% respectively and sums up to 12.4%) and Medicare (i.e. 1.45% respectively and equals to 2.9%). Simply put, the tax rate for self-employed in the US is 15.3%.

Tax Deductions


To calculate the amount of social security tax you should pay on Schedule SE, evaluate your net profits and losses on Schedule C and multiply it by 92.35%.After these calculations, you can evaluate the amount of self-employment tax you owe.

However, if your net income is less than $400 a year, you don’t need to pay the self-employment tax. The more your business expenses are, the lower the social security tax you need to pay.

You should, however, always remember that the social security benefits a person receives in the US heavily depend upon their taxable earnings. You can surely reduce your Schedule C income to reduce the state and federal taxes you owe, by increasing tax deductions but this way you can end up lowering the social security benefits you receive at the time of retirement.

Need Help?

Understanding the US’s social security system without the help of an experienced social security lawyercan be quite difficult.

Reach out to The Law Offices of Lisa Douglas if you want to discuss your social security concerns with an experienced social security lawyer in Little Rock. Check out their services today.

Disclaimer: This blog is only intended for educational purposes and shouldn't be used as a substitute for legal advice.

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