In the United States, self employment (SE) tax is the tax primarily levied upon individuals who work for themselves — self-employed people. The self-employment tax is a social security and Medicare tax that is very similar to the some of taxes withheld from the wages of people employed by another person or business — employees.

Sole proprieters, owners of small businesses, and independent contractors are examples of self-employed people. You can be self-employed and work part time or full time as long as you are working for yourself. Basically, if you work for yourself and someone else does not pay your tax, you must pay the self employment tax.

The self employment tax is currently 15.3%. Medicare accounts for 2.9% and social security accounts for the other 12.4%. The social security portion of the self employment tax is based on the first 94,200 US dollars (USD) the taxpayer receives as income. Therefore the most an individual would pay in terms of the social security portion of the self employment tax is 11,680 USD. The Medicare portion of the tax does not have a cap on the income on which it is based; it is based on the taxpayer's total income. For both of these portions of the self employment tax, the taxpayer's income includes combined wages, tips, as well as net earnings.

To pay self employment tax, the taxpayer must have a social security number (SSN) or, alternatively an individual taxpayer identification number (ITIN). SSNs may be applied for using Form SS-5. Non-resident aliens and resident aliens that do not have and are ineligible for a SSN will receive a ITIN from the Internal Revenue Service (IRS). ITIN applications may be made with a Form W-7.

The self employment tax needs to be paid as you earn money throughout the year. You must make quarterly estimated tax payments if you think you will owe tax. Quarterly payments should be made using Schedule SE (Form 1040).

If you are self employed and your net earnings are 400 USD or more, then you must pay self employment tax. Also, if you are a church employee with an earning income of just over 108 USD or more, then you must pay the tax.