Tax
Self-employment tax
Self-employment tax is the US Social Security and Medicare tax paid by individuals who work for themselves. It applies to net earnings from self-employment and is paid in addition to income tax. Employees split the equivalent cost with their employer; the self-employed pay both halves.
In plain terms: The Social Security and Medicare tax you pay when nobody else is paying half of it.
Why it matters
The cost the S-Corporation election is designed to reduce, by splitting income between salary and distributions. It generally applies to US persons; a non-resident with no US employment is usually outside the regime, though a totalization agreement may govern the position.
Read the full guideUS business taxes