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Self-Employment Tax (Schedule SE) Definition: A social security and Medicare tax primarily for individuals who work for themselves. It's similar to the social security and Medicare taxes withheld from the pay of most wage earners.
The IRS requires contractors to fill out a Form W-9, request for Taxpayer Identification Number and Certification, which you should keep on file for at least four years after the hiring.
Whatever you call yourself, if you are self-employed, an independent contractor, or a sole proprietor, a partner in a partnership, or an LLC member, you must pay self-employment taxes (Social Security and Medicare). Since you are not an employee, no Social Security/Medicare taxes are withheld from your wages.
If you are an independent contractor, then you are self-employed. The earnings of a person who is working as an independent contractor are subject to self-employment tax.
You must file Schedule SE if: The amount on line 4c of Schedule SE is $400 or more, or. You had church employee income of $108.28 or more. (Income from services you performed as a minister, member of a religious order, or Christian Science practitioner isn't church employee income.)
Paying yourself as an independent contractor Independent contractor pay allows your business the opportunity to stay on budget for projects rather than hire via a third party. As an independent contractor, you will need to pay self-employment taxes on your wages. You will file a W-9 with the LLC.
The net income information on Schedule C is used to determine the amount of self-employment tax you owe (for Social Security and Medicare taxes). Schedule SE is used to calculate the self-employment tax amount.
Independent contractors provide goods or services according to the terms of a contract they have negotiated with an employer. Independent contractors are not employees, and therefore they are not covered under most federal employment statutes.
How do I create an Independent Contractor Agreement?State the location.Describe the type of service required.Provide the contractor's and client's details.Outline compensation details.State the agreement's terms.Include any additional clauses.State the signing details.
More In Forms and InstructionsUse Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment. The Social Security Administration uses the information from Schedule SE to figure your benefits under the social security program.