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self-employment tax

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Self-employment tax
A tax self-employed people must pay to qualify them to receive Social Security benefits at retirement.

self-employment tax

A federal tax similar to the Social Security and Medicare taxes deducted and matched by employers. It is equal to 15.3 percent of net earnings from self-employment and must be calculated on Schedule SE and reported on Form 1040. Real estate agents, brokers, mortgage  brokers, and all other self-employed individuals are required to pay self-employment taxes. (See Tax Topic 554, “Self-Employment Tax” and Publication 334, “Tax Guide for Small Business,” at the IRS Web site, www.irs.gov.)



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Estimated tax is used to pay not only income tax but also self-employment tax, household employee tax, and the alternative minimum tax.
As a self-employed individual you will have a Schedule C to attach to your Form 1040, and self-employment tax is computed on Form 1040, Schedule SE.
As part of the annual liaison process between the IRS and the CalCPA Committee on Taxation, a question was submitted to the IRS pointing out self-employment tax problems that could arise because the 2007 instructions required each spouse electing qualified joint venture treatment for a rental real estate business to file a separate Schedule C (instead of Schedule E) even though that business' net income is not subject to the self-employment tax.
 
 
 
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