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What is self-employment tax and why do I need to pay it?
What is self-employment tax and why do I need to pay it?
Updated over a week ago

On top of income tax, self-employed individuals usually have to pay self-employment taxes.  This is a Social Security and Medicare tax that is usually withheld and paid separately by employers for salaried W2 employees.  Because self-employed individuals (or contractors) do not have an employer, they have to pay both the amount normally withheld by the employer as well as the additional payroll tax they would normally pay on top of the salary.

It can be complicated to calculate self-employment taxes, especially since it has different percentages depending on your year's income and can have separate percentages for different parts of your income (for example, for any income over $118,500).

With Bonsai Tax, though, it is made far easier as the total tax payments as well as the due dates are automatically calculated using your income and expenses.

For more information on managing freelance taxes, take a look at the Overview of Bonsai's Tax Resources.

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