How to Calculate the Self-Employment Contributions Act Tax (SECA)

List: Posted: 03/09/11

Self-employment tax is the tax rate that a self-employed person has to pay for social security and Medicare/Medicaid withholdings. These taxes are usually referred to as SECA or Self-Employment Contributions Act tax, and in most jobs, the employer pays part and the employee pays part.

 

So with self-employment, the individual must pay the whole sum. The amount of income you earn will determine how much you owe in taxes. Any person(s) operating as a sole proprietor, a partnership, or a limited liability company not considered a corporation will need to pay this tax.

To file for self-employment tax, it is important to total all of the income you have earned working for yourself. Multiply your net income by 0.9235 or 92.35%, this will be your net earnings. You will then determine your tax percentage based on the amount of income you have earned. If you have earned more than $76,200, you will multiply your net earnings by 2.9% or 0.029. If you have earned less than $76,200, you will multiply your net earnings by 15.3% or 0.153. This figure will tell you how much of your income is owed in self-employment tax.

Taxes will generally need to be paid quarterly with a specific form called 1040 ES. You will also have to pay federal income taxes and any state or local income taxes as applicable to your area. If you earn less than $400 in annual earnings, you are not subject to self-employment taxes.

 

If you have any questions regarding your self-employment tax, contact a tax consultant or refer to the IRS website for more information.

 

Tax Return Preparation, State & Income Taxes

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