Do I have to pay my Social Security and Medicare as an independent contractor?

by Ibolya Balog, CPA | Jul 25, 2016

I am an independent contractor. Do I have to pay my own Social Security and Medicare?

Yes. As an independent contractor you have to pay the full Social Security and Medicare contribution with some adjustments. Employees have half of the Social Security and Medicare taxes withheld from their pay and the employer pays the other half according to payroll tax regulations. Independent contractors are considered to be self-employed, and therefore must pay the full amount, which consists of both the “employee” and “employer” portions. These amounts are calculated after deducting ordinary and necessary expenses of generating the income, so in effect the amounts are based on “net” independent earnings rather than the “gross” amount received. Additionally, one half of the Social Security and Medicaid tax paid by the self-employed, including independent contractors, is an adjustment to income on the individual income tax return, which in effect reduces taxable income for the year in which it is paid.

Answered by: Ibolya Balog, CPA, is an associate professor at Cedar Crest College in Allentown, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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