Self-Employment Tax Definition

Term Definition
Self-employment taxes are paid by business owners who are sole proprietors and by those working as independent contractors. Partners in a business organized as a partnership are also subject to this tax.

Extended Definition
Taxpayers in the United States are required to contribute to the Social Security program. Employees have taxes deducted from their paychecks and employers pay matching taxes. Self-employed business owners who operate as sole proprietors or as part of a partnership must also contribute to the fund (Social Security tax and Medicare).

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