It's best to set aside funds throughout the year for the SE tax to avoid getting stung at tax time. Timely and accurate payment of the SE tax will help you maximize the Social Security benefits you can receive later in life. You're required to pay SE tax if:

1. You are a sole proprietor or independent contractor.
2. You are a member of a business partnership.
3. You run a part-time business.
4. You earn more than $400 in a year from self-employment.

To calculate and pay the SE tax:

Tips & Tactics
Helpful advice for making the most of this Guide

• Family members, such as a husband and wife, who run a business together, should report their net earnings on separate self-employment returns even if a joint income tax return is filed.
• The taxes you owe in a particular quarter depend on the amount of money you earned during that period.
• Keep a log of checks and expense receipts on a spreadsheet, by date, and also include, where allowable, items such as depreciation and the portion of your mortgage interest attributable to your home office.
• Keep all your tax records in a portable plastic file box so you'll have all the documents you need when meeting with your accountant.
• While rates can change, self-employed individuals were recently required to pay 15.3 percent of their income in SE taxes. The amount includes Social Security taxes of 12.4 percent and 2.9 percent for Medicare. All wages, tips and net earnings are subject to the 2.9 percent Medicare tax. Any changes to these rates will be described in the IRS tax forms you use to file for a particular tax year.