Self-Employment Tax Calculator – A Comprehensive Rundown

Self-employment tax calculator

Nothing can be more satisfying than being your own boss. Working as a freelancer or independent contractor comes with a lot of perks. But, as we all know, according to federal laws, you are supposed to pay certain taxes on your annual income, whether you are self-employed or doing a job. But being self-employed comes with a very big financial challenge, and that is managing your own taxes correctly. If a self-employed person does not give proper attention to filing income tax, they can get a real hook paying the taxes.  You might probably pay the SE (self-employment) tax and the income tax at the same time. But does a Self-employment tax calculator actually work? Or how a self-employed person can calculate the net tax on the annual income?

Let’s discuss the same below.

What Is the Actual Definition of a Self-Employment Tax Calculator?

SE tax or self-employment tax is supposed to get paid by freelance workers or independent contractors. For easy calculation, you can divide the total tax into two parts, the social security tax, and the Medicare tax. For the year 2022, the SE tax stands at 15.3%.

When you work in a typical full-time job, your employer company pays the taxes on your behalf, which gets cut from your paychecks. The employer can either pay both taxes or only one of them. In most cases, the employer pays the social security tax, and you pay the Medicare tax. (i.e., you pay 7.65%, and the employer pays 7.65%). But when you work as a freelancer, only you are the only responsible for paying the whole 15.3%.

Additionally, a Self-employment tax calculator also works with normal income taxes. Depending on your annual income, it can vary between 10% to 37%. Seven tax brackets were there for the year 2022.

Self-Employment Tax Rate For 2022-2023

In the seven tax brackets of 2022, it was clearly mentioned that for this year, the SE tax rate is 15.3%. Where 12.4% stood as the social security tax and the rest, 2.9%, stood as the medicare tax on net earnings. However, in 2022 the SE tax rules were:

Self-Employment Tax Rate For 2022-2023

  • The first $147000 of earnings of the self-employed is subject to the social security portion for the tax year of 2022. Later in 2023, it gets a hike to $160,200.

  • Based on the tax brackets of 2022, an additional 0.9% of medicare tax can get applied to you if your net income exceeds $200,000. This is the number if you are filling in for yourself only. But, if you are filling out the income file jointly, then the number will rise to $250,000.

The Proper Way to Calculate Self-Employment Tax

To build the right self-employment tax calculator, you should keep certain factors in mind:

  • SE tax works on your net income. That is the subtracted amount of your gross income from Self-employment and your business expenses.

  • Generally, you are supposed to pay a SE tax on 92.35% of your net earnings.

  • Next, when you have a clear amount in your mind that fits perfectly with your net earning amount, apply a 15.3% SE tax on that.

  • In case you forgot, according to 2022 tax brackets, your first $147,000 of earnings is subject to the social security portion or Self-employment tax.

  • Suppose you have just faced a loss or had very little income from Self-employment; then don’t forget to check the two optional methods in IRS Schedule SE just to calculate your net earnings. 

These are basic steps by which you can calculate your tax if you are a self-employed person. Numbers can vary from time to time, but the method should be the same.

Who Is Supposed to Pay Self Employment Tax?

Generally, a self-employed person is supposed to pay SE tax if these requirements match the net income of that person.

Self-Employment Tax Rate For 2022-2023

  • Either if you have made $400 or more than that from self-employment work, then you have to pay SE tax.

  • If you have received an IRS 1099 form from any of your clients. Where they are informing you how much money they have paid you during this tax year.

  • On the other hand, if anyone works as a church employee and if they have a net income of $108.28 or more than that, the SE tax will get applied to that person too.

  • The next scenario is when a person is working as a typical full-time employee and a freelancer, then both of the taxes will get applied to the person. Suppose you are working a full-time job from Monday to Friday, and you are doing something on the week-offs that is also paying you. Then you will pay both SE tax and normal income tax.

Process Of Self-Employment Tax Filing

  • On a general basis, a taxpayer uses IRS Schedule C to calculate net earnings.
  • Then you can use IRS Schedule SE to calculate how much tax you owe to the government.
  • You’ll need to provide your ITIN (individual taxpayer identification) while paying the tax.
  • Use an IRS Form 1040 to file the taxes. This form allows you to cut off your own expenses if you are a freelancer. This way, you can pay less amount as taxes.
  • Don’t wait for the tax filing deadline. This can cause a late payment penalty.
  • As a solution, don’t pay your whole tax annually. The best way is to pay your taxes quarterly.
  • You can pay your taxes directly with the help of the IRS’s direct pay feature. Anyone who is self-employed can directly transfer the taxes from the bank account.

If you are still confused about how to fill your tax so you can contact for a free consultation with “Professional Tax and Accounting Experts

Tax Deduction on Self-Employment Tax

SE tax has some sweet tax deductions. Suppose your audited information says that you owe $2000 as taxes. But you have filled out form 1040; then you can reduce your own expenses. If that is $1000. In such cases, you have to pay only $1000 as your SE tax.

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Frequently Asked Questions

How do you calculate the self-employment tax?

Generally, you have to pay a tax of 92.35% of your total income. You can get the number of your net earnings by subtracting your gross income and your business expense.

Is self-employment tax 15% or 30%?

According to the tax year 2022, the tax brackets clearly say that any self-employed person has to pay a tax of 15.3%.

Who is eligible for self-employment tax?

Self-employed persons who have a net income of more than $400 are eligible for Self-employment tax.

Can self-employed pay taxes monthly?

Yes, you can pay your taxes monthly. But you have to make a budget payment plan for this thing. Rather it is good for avoiding a late-payment penalty.

Author Details
CPA , The Bookify
I am a Certified CPA with over 20 years in the field of accounting, and I write about how to save time on your taxes and get the most out of your investments.

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