En 05 10022

2022
If You Are Self-Employed

Most people who pay into Social Security work for an In 2022, however, if your wages are $97,000, and
employer. Their employer deducts Social Security taxes you have $51,000 in net earnings from a business,
from their paycheck, matches that contribution, sends you don’t pay dual Social Security taxes on earnings
taxes to the Internal Revenue Service (IRS), and reports more than $147,000. Your employer will withhold
wages to us. But self-employed people must report their 7.65% in Social Security and Medicare taxes on your
earnings and pay their taxes directly to the IRS. $97,000 in earnings. You must pay 15.3% in Social
Security and Medicare taxes on your first $50,000 in
You’re self-employed if you operate a trade, business
self-employment earnings, and 2.9% in Medicare tax
or profession, either by yourself or as a partner. You
on the remaining $1,000 in net earnings.
report your earnings for Social Security when you file
your federal income tax return. If your net earnings are
$400 or more in a year, you must report your earnings
Work credits
on Schedule SE, in addition to the other tax forms You must have worked and paid Social Security
you must file. taxes for a certain length of time to get Social Security
benefits. The amount of time you need to work depends
Paying Social Security and Medicare taxes on your date of birth, but no one needs more than 10
years of work (40 credits).
If you work for an employer, you and your employer
each pay a 6.2% Social Security tax on up to $147,000 In 2022, if your net earnings are $6,040 or more, you
of your earnings. Each must also pay a 1.45% Medicare earn the yearly maximum of four credits — one credit
tax on all earnings. If you’re self-employed, you pay the for each $1,510 of earnings during the year. If your
combined employee and employer amount. This amount net earnings are less than $6,040, you still may earn
is a 12.4% Social Security tax on up to $147,000 of your credit by using the optional method described later in
net earnings and a 2.9% Medicare tax on your entire net this fact sheet.
earnings. If your earned income is more than $200,000
We use all your earnings covered by Social Security
($250,000 for married couples filing jointly), you must
to figure your Social Security benefit, so, report all
pay 0.9% more in Medicare taxes.
earnings up to the maximum, as required by law.
There are two income tax deductions that reduce
your taxes. Figuring your net earnings
First, your net earnings from self-employment are Net earnings for Social Security are your gross
reduced by half the amount of your total Social Security earnings from your trade or business, minus your
tax. This is similar to the way employees are treated allowable business deductions and depreciation.
under the tax laws, because the employer’s share
of the Social Security tax is not considered wages Some income doesn’t count for Social Security and
to the employee. shouldn’t be included in figuring your net earnings.
Such income includes any of these:
Second, you can deduct half of your Social Security
• Dividends from shares of stock and interest on
tax on IRS Form 1040. But the deduction must be taken
bonds, unless you receive them as a dealer in
from your gross income in determining your adjusted
stocks and securities.
gross income. It cannot be an itemized deduction and
must not be listed on your Schedule C. • Interest from loans, unless your business
is lending money.
If you have wages, as well as self-employment
earnings, the tax on your wages is paid first. But this • Rentals from real estate, unless you’re a real
rule only applies if your total earnings are more than estate dealer or regularly provide services mostly
$147,000. For example, if you will have $30,000 in for the convenience of the occupant.
wages and $45,000 in self-employment income in • Income received from a limited partnership.
2022, you will pay the appropriate Social Security
taxes on both your wages and business earnings.
(over)
SSA.gov If You Are Self-Employed
Optional method Even if you don’t owe any income tax, you must
complete Form 1040 and Schedule SE to pay
If your actual net earnings are less than $400, your self-employment Social Security tax. This is true even
earnings can still count for Social Security under if you already get Social Security benefits.
an optional method of reporting. You can use the
optional method when you have income from farming, Family business arrangements
non-farm income, or a combination from both. You
can use the optional method only five times in your life Family members may operate a business together.
when reporting non-farm income. There is no limit on For example, a husband and a wife may be partners or
using the optional method of reporting farm income. run a joint venture. If you operate a business together
Here is how it works: as partners, you should each report your share of
the business profits as net earnings on separate
• If your gross income from farm self-employment
self-employment returns (Schedule SE). This is the
was not more than $8,820 or your net farm
case even if you file a joint income tax return. The
profits were less than $6,367, you may report the
partners must decide the amount of net earnings each
smaller of two-thirds (2/3) of gross farm income
should report (for example 50% and 50%). Also, a
(not less than 0) or $5,880.
husband and wife who both materially participate in
• If your net income from non-farm self-employment a jointly owned business, and file a joint return, can
is less than $6,367 and also less than 72.189% make an election to be taxed as a qualified joint venture
of your gross non-farm income, and you had net instead of a partnership. Each must file a separate
earnings from self-employment of at least $400 in Schedule C or C-EZ.
two of the prior three years.
• You can use both the farm and non-farm methods Contacting Social Security
of reporting, and can report less than your total The most convenient way to do business with us
actual net earnings from farm and non-farm is to visit www.ssa.gov to get information and
self-employment. However, you can’t report less use our online services. There are several things
than your actual net earnings from non-farm self- you can do online: apply for benefits; get useful
employment alone. If you use both methods to figure information; find publications; and get answers to
net earnings, you can’t report more than $5,880. frequently asked questions.
NOTE: If you’re a farmer, you can use the optional When you open a personal my Social Security account,
reporting method every year. Having actual net you have more capabilities. You can review your
earnings of at least $400 in a preceding year isn’t Social Security Statement, verify your earnings, and
necessary. Also, other gross farm, net farm, and get estimates of future benefits. You can also print a
non-farm profit amounts may change each year. benefit verification letter, change your direct deposit
information, request a replacement Medicare card,
For additional information, read Tax Guide for Small get a replacement SSA-1099/1042S, and request
Business (IRS Publication No. 334) and IRS Schedule a replacement Social Security card (if you have no
SE at www.irs.gov or call 1-800-829-4933. changes and your state participates). Access to your
personal my Social Security account may be limited for
How to report earnings users outside the United States.
You must complete the following federal tax forms by If you don’t have access to the internet, we offer many
April 15, after any year in which you have net earnings automated services by telephone, 24 hours a day,
of $400 or more: 7 days a week, so you do not need to speak with a
• Form 1040 (U.S. Individual Income Tax Return). representative. Call us toll-free at 1-800-772-1213 or
• Schedule C (Profit or Loss from Business) at our TTY number, 1-800-325-0778, if you’re deaf or
or Schedule F (Profit or Loss from Farming) hard of hearing.
as appropriate. A member of our staff can answer your call from 8 a.m.
• Schedule SE (Self-Employment Tax). to 7 p.m., Monday through Friday. Wait times to speak
You can get these forms from the IRS on their website to a representative are typically shorter Wednesdays
at www.irs.gov. Send the tax return and schedules, through Fridays or later in the day.
along with your self-employment tax, to the IRS.
Social Security Administration

Publication No. 05-10022
January 2022 (Recycle prior editions)
If You Are Self-Employed
Produced and published at U.S. taxpayer expense

En 05 10022

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2022

If You Are Self-Employed

Social Security Administration

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