Are you self0employed? You may owe double the employment tax you’d owe as an employee. Here’s how to meet your employment tax obligations and save tax too.

Along with income tax, you are obligated to pay Social Security and Medicare taxes on earned income, such as salary and self-employment income. The 12.4% Social Security tax applies only up to the Social Security wage base of $118,500 for 2016. All earned income is subject to the 2.9% Medicare tax.

The taxes are divided equally between the employee and the employer. But when you’re self-employed, you pay both the employee and employer taxes on your self-employment income.

Extra 0.9% Medicare tax
Another employment tax higher-income taxpayers should be aware of is the extra 0.9% Medicare tax. This tax applies to FICA wages and net self-employment income exceeding $200,000 per year (or $250,000 for married filing jointly and $125,000 for married filing separately).

If your income differs significantly from year to year or you’re close to prompting the additional Medicare tax, income timing strategies can help you avoid or minimize it. For example, as a self-employed taxpayer, you have flexibility for when you purchase new equipment or invoice your customers. And if your self-employment income is from part-time endeavors and you’re also an employee somewhere else, you can time with your employer when you receive a bonus.

Withholding Rules
Something else to consider with this situation is the withholding rules. Employers will withhold the additional Medicare tax beginning in the pay period when wages exceed $200,000 for the calendar year — without regard to an employee’s filing status or income from other sources. Therefore, your employer might not withhold the tax although you are liable for it due to your self-employment income.

If you do owe the tax but your employer isn’t withholding it, consider filing a W-4 form to request income tax withholding. This can be used to cover the shortfall and avoid interest or penalties. Or, you can make projected tax payments.

Deductions for Self-Employment
For the self-employed, the employer portion of employment taxes is deductible above the line (6.2% for Social Security tax and 1.45% for Medicare tax). (No portion of the additional Medicare tax is deductible because there’s no employer portion of that tax.)

As a self-employed taxpayer, you might benefit from other above-the-line deductions as well. You are able to deduct 100% of health insurance costs for yourself, your spouse, and your dependents, up to your net self-employment income. You can also deduct contributions to a retirement plan, and if you’re eligible, an HSA for yourself. Above-the-line deductions are valuable because they reduce your adjusted gross income (AGI) and modified AGI (MAGI), which can trigger certain additional taxes and the phase outs of many tax breaks.

For more information on the ins and outs of employment taxes and tax breaks for the self-employed, please contact your tax advisor for more information.