Social Security Disability for the Self-Employed

Social Security Disability for the Self-Employed

Have you recently switched from being an employee to someone who is self-employed? Are you wondering if, and how you will be paying into Social Security?

While most people pay into Social Security when they work for an employer, this does not mean that self-employed individuals do not pay into the system.

If you are self-employed, you will report your earnings for Social Security at the time that you file your federal income tax return.

Assuming that your net earnings are at least $400 for the year, you will have to report your earnings on Schedule SE, in addition to the other tax forms that you file for the year.

How Social Security & Medicare Taxes are Paid

When someone is an employee, the employer and the employee each pay a 6.2 percent Social Security tax on up to $118,500 of the employee’s earnings, and a 1.45 percent Medicare tax on all of the earnings.

If a person is self-employed, he or she pays the combined employee and employer amount of 12.4 percent Social Security tax on up to $118,500 of the individual’s net earnings, and a 2.9 percent Medicare tax on the entire net earnings.

If you are self-employed and your income is over $200,000 ($250,000 for married couples who file jointly), then you will have to pay 0.9 percent more in Medicare taxes. However, there are two income tax deductions that will reduce your taxes:

  • Net earnings from self-employment are reduced by half of the total Social Security tax.
  • You are able to deduct half of the Social Security tax on IRS Form 1040. The deduction has to be taken from the gross income when determining the adjusted gross income. If it cannot be an itemized deduction, it cannot be listed on the Schedule C.

Do you have wages and self-employment earnings? In that case, the tax on your wages shall be paid first; this only applies if your total earnings exceed $118,500.

Getting Social Security Benefits

In order to receive Social Security benefits, you must have worked and paid Social Security taxes for a certain amount of time. How much work experience you need depends on your date of birth, however, you don’t need more than 10 years of work experience (40 credits).

To learn more about Social Security Disability benefits for the self-employed, contact The Zendeh Del Law Firm, PLLC to meet with a Dallas Social Security Disability attorney!