Self-Employment Tax for Dummy Freelancers

Paying estimated quarterly taxes

Just about everyone on staff at the Antisocial Network has been self-employed at one time or another, from augmenting their income by writing content for companies like Demand Media to selling stuff on eBay to consulting at three figures per hour rates. The first time we had to pay taxes on self-employment income we were all faced with the same question: "How do I Pay Social Security Self-Employment Taxes?"¹ Thankfully, we had better advice than what eHowian Etch Tabor offered up...

Tabor got some of the basics right: You gotta pay, you use schedule SE, you pay on net income. Where Etch (gotta love that pen name: anagrammed, maybe?) totally blew it is probably due to the fact that he'd never really been self-employed before becoming a "full-time freelance writer." We figured that out because Etch's instructions are pretty simple (and pretty incomplete):

Fill out Schedule C... Check the current tax rate... Calculate your net earnings... Apply the current Social Security tax rate to your net earnings... Fill out Schedule SE...  Well, he got steps 1, 3, and 5 right. When it comes to steps 2 and 4, the "current tax rate" is built into schedule SE, which anyone who is in reality a "full-time freelance writer" should know after his or her first tax year.

When all is said and done, Tabor did his readers a grave disservice with his poor job of describing self-employment taxes. There are several reasons why: the first is that he neglected to mention that half of that Self-employment tax is deducted on form 1040, another is that he neglected to mention the maximum self-employment tax.

Etch's greatest sin, however, is that by acting like he knew how to pay SE taxes but only mentioning end-of-year filing, he could have left his readers liable to penalties and interest. You see, our Dumbass of the Day never mentioned form 1040-ES, the form used to estimate and pay quarterly taxes. For that, he deserves the scorn of everyone who has ever had to fill out that form!

¹ The original has been deleted by Leaf Group, but can still be accessed using the Wayback machine at archive.org. Its URL was    ehow.com/how_6899148_do-social-security-self_employment-taxes_.html

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SE - TAXES