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.