Those who work for employers in the United States have Social Security tax taken out of every payment of wages. Self-employed individuals are responsible for calculating the amount of Social Security tax they owe and sending it to the Internal Revenue Service in the form of estimated quarterly tax payments.Continue Reading
The total Social Security tax is 12.4 percent of net earnings as of 2015. Employers and employees each pay half of an employee's Social Security tax payments. Self-employed people must pay both the employer and employee portions of Social Security tax, but they can deduct the employer's portion when calculating their adjusted gross income for income tax purposes. Net earnings are subject to Social Security tax up to a 2015 contribution and benefit base of $118,500. On income beyond this amount, no Social Security tax is levied.
As long as individuals continue to work at jobs covered by Social Security, they must pay Social Security taxes, even if they are already receiving Social Security benefits. Self-employed individuals, sole proprietors of small businesses, partners and shareholders in S corporations must calculate and make estimated quarterly payments on any income that is not subject to withholding. Those who fail to pay enough in estimated quarterly payments are charged a penalty, even if the IRS owes them a refund after they file their tax return.Learn more about Social Services