Small Business Dictionary

Social Security Tax

Social Security Tax must be paid directly to the Internal Revenue Service when self-employed people file their federal income tax return and report earnings of $400 or more in a taxable year. According to the SSA, the Social Security Tax rate for 2011 is 15.3 percent (same as 2010) on self-employment income up to $106,800. If your net earnings are higher, you pay only the Medicare portion (2.9 percent) of the Social Security Tax on the rest of your earnings.