[CareyC68]

I am an employee who has a 1099 and receive cash for other jobs. Why do I have to pay self employment tax? Why do I pay more than the Individual income tax schedule?

[AtlantaTaxExpert]

Because you are an INDEPENDENT CONTRACTOR who has paid NO Social Security or Medicare taxes through your job.

The self-employment tax corrects that issue.

[Fr_Chuck]

Yes, if you were employed by a company you would have been paying 7.5 percent of your pay as social security and the owner of that comopany has to pay 7.5 percent in matching funds. So 15 percent is paid into social security.

So because as a indepenedent contractor, you own your own business, and have to pay the full 15 percent in taxes ( called self employment which is your social security payment)

You also don't pay any unemployment taxes, since this is your own business.

[AtlantaTaxExpert]

Actually, the percentages are 6.2% for Social security and 1.45% for Medicare.

This is important because there is a cap on Social Sceurity collections. They stop once your income hits $97,400.

There is NO CAP on Medicare taxes, which means Alex Rodriquez pays ALMOST $400,000 in Medicare taxes on his $27.5M salary.