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How the Self-employment Tax Works

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Author's Note: How the Self-employment Tax Works

As a freelance writer, I am all too familiar with the self-employment tax. I wasn't always so savvy, though. I clearly remember the first year I broke out on my own, so excited to be getting paid directly for my work, but completely unaware that no one was withholding income or FICA taxes from my paychecks. Boy did I get an unwelcome surprise when April rolled around! We owed a big chunk of change in federal and state taxes, plus the dreaded self-employment tax. We've been paying estimated taxes ever since, so now we feel the pain year-round, just like everybody else.

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Sources

  • Fitzpatrick, Diana. "How to Avoid Estimated Tax Penalties." Nolo (Dec. 5, 2014) http://www.nolo.com/legal-encyclopedia/estimated-tax-penalities-how-avoid-underpaying.html
  • Fox, Justin. "Where are All the Self-Employed Workers?" Harvard Business Review. Feb. 7, 2014 (Dec. 5, 2014) https://hbr.org/2014/02/where-are-all-the-self-employed-workers/
  • IRS. "Self-Employed Individuals Tax Center." (Dec. 5, 2014) http://www.irs.gov/Individuals/Self-Employed
  • IRS. "Self-Employment Tax (Social Security and Medicare)" (Dec. 5, 2014) http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employment-Tax-Social-Security-and-Medicare-Taxes
  • Social Security Administration. "Benefits Planner: How Credits are Earned" (Dec. 5, 2014) http://www.socialsecurity.gov/retire2/credits1.htm
  • Upper New York Annual Conference of the United Methodist Church. "Special Clergy Tax Rules" (Dec. 5, 2014) http://www.unyumc.org/pages/detail/1397

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