Self-employment tax is comprised of the Social Security and Medicare taxes required by law to be paid on an individual’s earnings. These taxes are automatically deducted from typical salaried employees’ checks. All self-employed individuals are obligated to pay taxes on their earnings. Unlike individuals employed by a company, taxes are not automatically withheld from those earnings.
Self-employed taxes can be paid periodically throughout the tax year, or in a lump sum when taxes are filed. It is good practice to keep track of your earnings and calculate an estimated self-employment tax throughout the year.