Self Employment Taxes
Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. Social Security benefits are available to self-employed persons just as they are to wage earners. Most people who pay into Social Security work for someone else. Their employer deducts Social Security taxes from their paycheck, matches that contribution, and sends wage reports and taxes to the Internal Revenue Service (IRS) and Social Security. But self-employed people must report their earnings and pay the taxes directly to the IRS.
The main source of Social Security income is the taxes that employees, employers, and the self-employed pay. This is the primary method of financing Social Security. Both benefit amounts and Social Security taxes are based on the worker’s earnings under the program.