The self-employment taxes are outside of what’s reported on Forms 1099 as they only report the amount paid and the federal, state, or local income tax withheld.
When an employer processes payroll, Social Security and Medicare taxes are taken out along with the income taxes. This isn’t the case for self-employed individuals as they need to handle their taxes themselves. The self-employment tax has not much to do with the 1099s received as no form shows the amount owed. If you’re self-employed and want to calculate self-employment tax, add the total amount of income reported and calculate the tax amount.
For the time being, the self-employment tax is 12.4 percent for Social Security and 2.9 for Medicare. While it’s 7.65 percent in total for employees, the same amount is also paid by their employers. As someone self-employed, you are responsible to pay both portions which total at 15.3 percent.
Add the total amount reported on all Forms 1099 and take out 15.3 percent of it.
Self-employment tax deduction
The self-employment tax paid is deductible but not all of it. Taxpayers can deduct half of what’s paid in self-employment taxes. If you’ve paid $10,000, you can deduct $5,000 off of your taxable income. Although it would be nice to get a tax credit for self-employment taxes as you’re paying the government, you only get a deduction.
Calculating and paying self-employment taxes is quite easy as all you need to do is file Schedule SE and attach it to your 1040. If you’re using a tax preparation service, it’s a lot more easier but you’ll have to pay slightly more than what an employee of someone would pay.