- Owners of businesses organized other than as a corporation are not employees of their businesses. As such, they are personally responsible for paying Social Security and Medicare taxes (called “Self-employment tax.”)
- Owners of unincorporated businesses pay self-employment tax on NET earnings from self-employment.
- ½ of Self Employment tax is deductible as an adjustment to gross income on your personal tax returns.
For tax purposes, self-employment tax is computed on Form SE and is recorded on Schedule C and Form 1040.