Social Security and Medicare tax required of self-employed persons. Unlike employees of a business, who share this tax with their employer, self-employed persons must pay the full amount of the tax. Two deductions result from the Social Security tax: half the tax can be used to reduce net earnings; also, half the tax can be used as a deduction on IRS Form 1040. See also Self-Employment Contributions Act.
A tax that self-employed people have to pay to cover
their Social Security taxes. When people are employed, their employer pays half
of the Social Security tax; if a person is self-employed, he or she has to pay
the entire amount. The self-employment tax is currently around 15 percent, but
is usually adjusted every year.