Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Who Pays Self-Employment Tax?
Sole proprietors, partners, LLC members (provided no election was made to treat the LLC as a C or S corporation), dealers in commodities and options, and farmers may be subject to self employment tax.
A C corporation or S corporation owner/shareholder who works for the business is an employee of the business and is subject to the same employment tax rules as any other W-2 employee.
Sole Proprietors
A sole proprietor is not considered an employee of his/her own business, and therefore, is not subject to withholding taxes on the income from his business. Self-employed persona generally pay quarterly estimated taxes to cover their:
- Federal income tax liability on business net income and
- Self-employment tax on net earnings from self-employment.
Partners
A partner in a partnership is not considered an employee of the business. Taxes are not withheld on partnership income. Each partner must pay his/her own income taxes and self-employment taxes on net earnings from self-employment.
Limited Partners
A partnership may include investors called limited partners. Unlike a general partner, who has unlimited liability for partnership debts, a limited partner is generally only liable up to the amount of his/her investment in the business.
- A general partner pays self-employment tax on earnings from self-employment.
- A limited partner does not pay self-employment tax on his share of partnership income. However, if a limited partner receives guaranteed payments for services performed, such payments are subject to self-employment tax.
Retirement payments to partners are not subject to self-employment tax, provided:
- The payments are made under a qualified written plan providing for periodic payments
- The payments are not for services performed for the partnership
- The partner's share of partnership capital has been paid in full by the end of the partnership tax year.
Limited Liability Company (LLC) Members
LLC members owe self-employment tax when they...
- Provide services for their business,
- Participate in the management, and
- Are not passive investors.
Multiple-Member LLC:
Multiple-member LLC members, for tax purposes, are automatically treated as partners in a partnership unless an election was made to tax the entity as a C or S corporation.
Single-Member LLC:
A member of a single-member LLC, for tax purposes, is automatically treated as a sole proprietorship unless an election was made to tax the entity as a C or S corporation.
Dealers in Commodities and Options
Dealers in commodities and options are subject to self-employment tax.
Farmers
A farmer operating as a sole proprietorship (Schedule F) is subject to self-employment tax. Cash or payments in kind under the Payment-in-Kind program are considered earned income and are subject to self-employment tax.
Statutory Employees and Self-Employment tax
Statutory employees are not subject to self-employment tax. Statutory employees include full-time life insurance salespersons, commission drivers distributing certain foods and beverages, pieceworkers, and full-time traveling or city salespersons.
The employer of a statutory employee must withhold FICA taxes from the employee's income.