How to File Self-Employment Taxes

SECA tax, or Self-Employment Contributions Act tax, is the self-employed individuals' contribution to Social Security and Medicare. When a person has an employer, the employer handles these taxes during payroll. The employer pays half of the Social Security and Medicare tax, only they call it FICA, and the employee pays the other half. Unfortunately, self-employed individuals are stuck paying the entire bill themselves.

Things You'll Need

• Schedule SE
• Schedule C
• Form 1040-ES

Instructions

1. Print the PDF files for form 1040-ES Estimated Tax for Individuals and Form 1120-W Estimated Tax for Corporations from the IRS website. It is necessary to make quarterly payments if you will owe the government more than $1,000 when you file your taxes to avoid penalties.

2. Request Schedule C if your self-employment activity is from Business, Schedule F if it is for Farming or K-1 if it is a partnership. Fill in the lines on your schedule, listing your earnings by source and your expenses by category. Schedule C also has a section for Cost of Goods Sold if applicable. Calculate your net income or loss.

3. Fill in your net income on Schedule SE line 1, if the net income number came from Schedule F or Schedule K-1 and was earned from farming activity. Fill in your net income on line 2 if the net income is from Schedule C or Schedule K-1 and was earned from non-farm activity.

4. Multiply your net earnings from self-employment by 92.35 percent or .9235. If the number you arrive at is less than $400, you do not need to complete the form; you owe no tax. Otherwise, multiply the number times the current SECA tax rate. Enter this amount on your 1040 tax form beside self-employment tax in the "Other Taxes" section. Attach form SE to your prepared tax forms when complete. There is a cap to consider, however. If you made over $97,000, you may not pay self-employment tax on the amount over that cap.

5. Multiply your self-employment tax owed by 50 percent. Enter this amount on your 1040 in the "Adjusted Gross Income" section under one-half self-employment tax. You will be allowed to reduce your adjusted gross income by this amount.

6. Staple all of your forms together and submit to the IRS prior to midnight of April 15. Attach a check for any amount owed.

Tips & Warnings

• You may owe penalties to the IRS if you fail to make estimated payments quarterly throughout the year and owe over $1,000.

Resources

• IRS: 1040 Self-Employment Tax
• Wachovia: The Self-Employment Tax
• IRS: Paying Estimated Taxes