Is the self employment tax 15.3 percent on the employers earnings PLUS matching an employee’s SS and Medicare?
Like as an employer, you have a salary. So do you take 15.3 percent of your salary PLUS what you have to match on the employee’s SS and Medicare or do you only pay 7.65 percent on the employer salary and then match your employee’s SS and Medicare? Sorry if this is confusing
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As an employer, you pay half of the 15% for each employee, they pay the other half. How the actual employer has to do it depends on how they have have business set up. They pay the same total 15%.
The self-employment tax IS Social Security and Medicare. When you are self-employed, you are both the employer and the employee - that's why you pay double.
It is so confusing I can't tell what you are really asking.
No, no, and no. It is none of those.
Your "net earnings" are defined as 92.35% of your "net profits".
The self-employment tax is 15.3% of the "net earnings". (If you do the math, this comes out to about 14% of the "net profits".)
Half of that (exactly 7.65% of net earnings, or approximately 7% of net profits) is the "employee" contribution and the other half (exactly 7.65% of net earnings, or approximately 7% of net profits) is the "employee" contribution.
It's not that "plus" anything. It's ONLY that.
Then, and this is where the really confusing part comes in, when you figure out your INCOME tax, you take the profit (which becomes "business income") and subtract 1/2 of the self-employment tax (exactly 7.65% of net earnings or approximately 7% of net profits), so you're effectively paying income tax on approximately 93% of net profits.
For employees, the 'employee' and 'employer' share of social security and medicare taxes TOTAL 15.3% up to the limits for social security. For someone that IS NOT an employee, the self employment tax is paid INSTEAD of those taxes
Note: In BOTH cases, the total amount comes out of whatever was budgeted for employee compensation.
An employer pays employment taxes (FICA), NOT self-employment tax (SE). Only individuals that work not as an employee and don't have FICA deducted from 1099 independent contractor payments are subject to SE tax. There is no SE tax on EMPLOYERS, whether they pay workers as employees or as contractors.