Calculating Your Self Employment Tax
Self employment tax predominantly applies to self employed persons and sole proprietors. Their tax is generally more complicated than that of an employee wage earner. That is why it is important for self employed persons and sole proprietors to be very careful while calculating their taxes.
One of the most important tasks for self employed persons is to determine the net income from their self employment. For tax purposes, the net income is deemed as the total business receipts minus the total business deductions. Your deductions are one significant part of calculating your taxes, and this is a unique aspect that is usually not applicable to employees. Typically, self employment tax does not cover unearned income such as capital gains, rental income, pensions and interest.