Tired of the bustle of commute? More and more people choose to work for themselves as the internet develops and their working skills leap.Generally, if you choose to be a self-employer. in addition to confirming your working type, you should also figure out your annual income target, time management, and especially the tax paying.
Tax is never a simple issue. Let’s start with the following three basic questions for your better work-from-home career!
Q1 : What is Self-Employment Tax ?
It is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves.In fact, this tax is the part that is usually withheld from the pay if you are a wage earner.
When you work like normal people, your earnings are taxed at a 6.2% rate for Social Security and 1.45% for Medicare. Additionally, your employer also contributes the same amount — a total of 7.65% of your wages.
However, in a self-employed situation, you are both the employer and the employee. So you have to pay with a 15.3% rate in total. And this is the self-employment tax rate of 2017.
This means that if a self-employed person’s net income up to $127,200, he or she will have a FICA tax of 15.3% (the 12.4% of Social Security tax plus the 2.9% of Medicare tax). The amount in excess of $127,200 will be subject to the 2.9% Medicare tax.
Q2 : Who Must Pay Self-Employment Tax ?
Generally, you must file tax if either of the following applies.
- Your net earnings from self-employment (excluding church employee income) were $400 or more.
- You had church employee income of $108.28 or more.