Self-employed individuals are responsible for paying both their personal Social Security tax and the employer matching payment. For people in traditional employment, their employers pay an amount equal to the workers FICA tax payment into the Social Security system with every withholding period. Self-employed individuals are considered to be their own employers, so they are responsible for both halves of the total Social Security tax.

Calculate Your Profit for the Year

Self-employment is viewed as a business by the IRS. Use IRS form 1040 Schedule C to calculate your personal profit from business income during the year. Your profit is basically your gross income minus any operating expenses you incurred during the year. You will be able to calculate your net profit by completing Schedule C. Take the amount of net profit you arrive at from line 31 and transfer it to your Schedule SE.

Calculate Your Self-Employment Tax

Enter your net profit on line 2 of your Schedule SE. Calculate your net profit from self-employment by multiplying your net income by .9235 (92.35%). If you had a net income from self-employment in excess of $400, you must pay self-employment tax. Calculate your self employment tax according to the instructions on Schedule SE based on your income. If you had a net income below $106,800, multiply your income by .153 to arrive at your self-employment tax. If you had a net income in excess of $106,800, multiply your income by .029 and add 13,243.20 to arrive at your self-employment tax.

Complete Your Tax Return

Enter your business income from Schedule C on line 12 of your form 1040. Enter your self-employment tax from your Schedule SE on line 56 of your form 1040. Complete the rest of form 1040 to arrive at your total tax owed or refund due. Attach a copy of Schedule C and Schedule SE to your form 1040 when you send it to the IRS.

Source:

IRS form 1040

IRS Schedule C

IRS Schedule SE