Question

Sole proprietors and independent contractors pay (1) - (2) taxes on their net profit, which represents both the employee and employer component of FICA and Medicare.

a) Income, Excise
b) Social Security, Medicare
c) Federal, State
d) Excise, Property

Answer 1

Sole proprietors and independent contractors pay social security and Medicare taxes on their net profit, which represents both the employee and employer component of FICA and Medicare.

Step-by-step explanation:

Sole proprietors and independent contractors pay social security and Medicare taxes on their net profit, which represents both the employee and employer component of FICA and Medicare.

An employee typically sees 6.2% deducted from their paycheck for Social Security and 1.45% for Medicare. However, as economists suggest, the employer's half of the taxes are likely passed on to employees in the form of lower wages.

If you are a member of the "gig economy" and receive a 1099 tax statement, then you are considered an independent contractor and must pay both the employee and employer side of the payroll tax.