Hey everyone,

I have a few questions regarding self employment tax for freelance work. First, What constitutes a worker as self employed? I've viewed some resources that suggest many freelancers are misclassified as self employed while they are really employees, therefore shifting some of the tax responsibility to the employer. Second, how does one build in a self employment tax to their business model? Is it proper to charge the client a 15.3% fee for this tax per job or build it into the rate? Any help you can offer regarding this issue is greatly appreciated.

Thank you.

I have a few questions regarding self employment tax for freelance work. First, What constitutes a worker as self employed? I've viewed some resources that suggest many freelancers are misclassified as self employed while they are really employees, therefore shifting some of the tax responsibility to the employer. ==========>>It is critical that business owners correctly determine whether freelancers providing services are W2 EEs or 1099 independent contractors.when it comes to employee versus freelance status, the issue is not that simple; I guess it depends; a freelancer can work simultaneously as a W2 EE and as a self-employer. A freelance is a W2 EE aslongas the characteristics of employment based on a contract are met, for example, if the work is done for another party for compensation and under the management and supervision of this other party.
Under common-law rules, anyone who performs services for you is your W2 EE if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.
A freelancer is a self-employer aslongas the work is done without being in an employment or service relationship. Work done for other purposes than earning an income or simply owning a business does not fall subject to the Self-employer.there are the questions you need to answer in order to determine if a person is really a freelancer. For example,
does she/he run an independent business that performs a service for multiple companies? Did she /he incorporate? Does she/he have business insurance, a business bank account, an actual office? Does she/he have a website, a logo, marketing materials? For how many other customers does she /he provide services? If the answer to all these questions is no, he/she is better off making her a W2 EE.in general, Freelancers should be able to work where and when they want. W2 EEs are told what to do, but freelancers are told what needs to be done or etc.


Second, how does one build in a self employment tax to their business model? Is it proper to charge the client a 15.3% fee for this tax per job or build it into the rate? ==========>>No, I do not think so; as a self employer, you need to file return aslongas the amt reported on SCh C of 1040 line 29 / 31 is $400 or exceeds $400 also you need to pay self employment taz aslongas the amt on SCh SE line 2 / 3 is also $400 or exceeds $400. If you are filing as a sole proprietor and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1K or more, after your refundable/nonrefundable credits on 1040, when you file your return. However, You do not have to pay estimated tax for the current year if You had no tax liability for the prior year; You were a U.S. citizen or resident for the whole year; Your prior tax year covered a 12 month period. In reality many self employers whose net earnings on Sch C are not very high do not pay estimated taxes due to lower penalties and interest. Your SECA tax, the self-employment tax, for income earned in 2014 is 15.3 percent.The 15.3 percent tax rate is the result of a 12.4 percent Social Security tax , oasdi, I mean, and 2.9 percent Medicare tax, however you can claim 50% of the seca tax on on your 1040.

Hey wnhough,

Thanks for the help! Also, if I meet the criteria as an employee (w2 ee), is it the employer's responsibility to withhold the necessary tax from a job's payment?

I have a few questions regarding self employment tax for freelance work. First, What constitutes a worker as self employed? I've viewed some resources that suggest many freelancers are misclassified as self employed while they are really employees, therefore shifting some of the tax responsibility to the employer. Second, how does one build in a self employment tax to their business model?===>I guess it depends; unless you receive a W2 from your ER, you are not an EE; in general, your ER must withhold income taxes, withhold and pay Social Security and Medicare taxes for you, and pay unemployment tax on wages paid to you, an employee. Aslongas you perform services for your ER , you are his/her employee if your ER can control what will be done and how it will be done. What matters is that your ER has the right to control the details of how the services are performed by you.So,You are not an independent contractor if you perform services that can be controlled by an employer what will be done and how it will be done. This applies even if you are given freedom of action. What matters is that the ER has the legal right to control the details of how the services are performed. There are
Some factors used to evaluate right to control and the validity of independent contractor classifications; for exampleyou’re your hours or days of work are not dictated by a company ; If an ER does not require work to be performed in specific order or sequence; or if you simultaneously provide services for several unrelated companies are likely to qualify as independent contractors or etc.

Employers uncertain about how to classify a worker can request an IRS determination by filing Form SS-8,

Is it proper to charge the client a 15.3% fee for this tax per job or build it into the rate? ====>No; you must pay 15.3% of your own Soc sec taxes called self employmenttax aslongas the amt on Sch SE line 2 / 3 is $400 orexceeds $400 , however you can claim 50% of the seca tax on your 1040. Also aslongas the amt on Sch C of 1040 line 29 / 31 is also $400 or exceeds $400 you must file return; If you are filing as a sole proprietor, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1K or more when you file your return;however, You do not have to pay estimated tax for the current year if you had no tax liability for the prior year
;You were a U.S. citizen or resident for the whole year; Your prior tax year covered a 12 month period

Correct;your ER’s federal payroll tax responsibilities include withholding from your paycheck and paying ER’s portion of contribution for Social Security and Medicare taxes; Soc sec taxes are somewhat unique in that there is required withholding from an ee's wages as well as an er's portion of the taxes that must be paid. FICA is comprised of a 6.2 % Social Security tax;a 1.45 % Medicare tax for EE’s portion and the er's portion of two of these taxes:a 6.2 percent Social Security tax; and; a 1.45 percent Medicare tax .So your ER’s portion for the Social security tax and the regular Medicare tax is the same amount that you're required to withhold from your wages salaries, commissions, bonuses, etc

Excellent. Thanks!

No problem good luck~~