Self Employment Tax

Self Employment Tax Definition (in the Accounting Vocabulary)

The New York State Society of Certified Public Accountants offers the following definition of Self Employment Tax in a way that is easy for anybody to understand: Most individuals that are in business for themselves, such as SOLE PROPRIETORS, PARTNERS or independent contractor, are subject to self employment taxes. The taxes provide coverage for the self employed individual for social security (OASDI) and Medicare benefits (HI) similar to the taxes withheld by employers from wages it pays the employees.

United States Tax Concept of Self Employment Tax

Tax paid by self employed persons on the net income from their trade or business to finance Social Security and Medicare coverage. For 1999 the rate is 15.30% on the first $72,600 of earnings and 2.9% on all amounts over $72,600.