By Nicole Tiggemann Tribune News Service
WWR Article Summary (tl;dr) Nicole Tiggemann, a spokesperson for the Social Security department shares a quick rundown on how Social Security works when you operate your own business.
Tribune News Service
If you are not self-employed, Social Security taxes are typically taken out of your paycheck automatically.
You and your employer each pay a 6.2 percent Social Security tax on up to $132,900 of your earnings and a 1.45 percent Medicare tax on all earnings in 2019.
You don't have to do anything extra for the coverage you will one day receive because your employers handle the deduction as well as matching that contribution. Then they send the taxes to the Internal Revenue Service (IRS) and report your wages to Social Security.
If you're self-employed, the process is a little different. You report your earnings for Social Security and pay your taxes directly to the IRS when you file your federal income tax return.
You pay the combined employee and employer amount, which is a 12.4 percent Social Security tax on up to $132,900 of your net earnings and a 2.9 percent Medicare tax on your entire net earnings in 2019.
You are considered self-employed if you operate a trade, business or profession, either by yourself or as a partner. If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to other tax forms you must file.
Net earnings for Social Security are your gross earnings from your trade or business, minus your allowable business deductions and depreciation. Some income doesn't count for Social Security and shouldn't be included in figuring your net earnings.
You must have worked and paid Social Security taxes for a certain length of time to get Social Security benefits. The amount of time you need to work depends on your date of birth, but no one needs more than 10 years of work.
You can read more about self-employment and Social Security at www.socialsecurity.gov/pubs/EN-05-10022.pdf. ___ ABOUT THE WRITER Nicole Tiggemann, Social Security spokesperson.