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How self-employment taxes work
Self-employment tax generally covers Social Security and Medicare taxes for people with net earnings from self-employment. The amount and treatment depend on the taxpayer’s activity and entity classification.
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Entity structure can affect tax treatment
Sole proprietors, partners, LLC members, corporate employees, and S corporation shareholders can have different payroll and self-employment tax treatment. A legal entity alone does not guarantee a tax saving.
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Important note
Tax elections can have significant consequences. Use this material as an educational starting point and consult a qualified tax advisor before changing entity or tax classification for tax reasons.