If you’re like many Americans who work for employers, Social Security taxes are automatically taken out of your paycheck. You and your employer each pay a 6.2-percent Social Security tax on up to $132,900 of your earnings, and a 1.45-percent Medicare tax on all earnings in 2019.
You don’t have to do anything extra for the coverage you will one day receive, because your employers handle the deduction as well as matching that contribution. Then they send the taxes to the Internal Revenue Service and report your wages to Social Security.
RULES FOR SELF-EMPLOYED But if you’re self-employed, you report your earnings for Social Security and pay your taxes directly to the Internal Revenue Service when you file your federal income tax return.
You pay the combined employee and employer amount, which is a 12.4-percent Social Security tax on up to $132,900 of your net earnings, and a 2.9-percent Medicare tax on your entire net earnings in 2019.
WHO IS SELF-EMPLOYED? You are considered self-employed if you operate a trade, business or profession, either by yourself or as a partner. If your net earnings are $400 or more a year, you report your earnings on Schedule SE, along with other tax forms you must file.
Net earnings for Social Security are your gross earnings from your trade or business, minus your allowable business deductions and depreciation. Some income doesn’t count for Social Security and shouldn’t be included.
HOW LONG YOU HAVE TO WORK You must have worked and paid Social Security taxes for a certain length of time to get Social Security benefits. The amount of time you need to work depends on your date of birth, but no one needs more than 10 years of work.