Double taxation between personal income and self employment income?

[mprabs]

Hello,

I have some W2 income and self employment income for 2020. 

What I am noticing in Turbotax is that it is showing my personal income tax (Form 1040 Line 22) that includes my self-employment income. In addition, it is calculating SE tax (Form 1040 Line 23). 

Is this correct or am I doing something wrong? It looks like self-employment income is being taxed twice (since it is added to the personal income before calculating my personal income tax) as well as self-employment tax separately. 

Appreciate any insights.

[VolvoGirl]

Yes that is right.  You pay both regular income tax and self employment tax on it.  The SE tax is in addition to your regular income tax on the net profit.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 14 which flows to 1040 line 10a.  Turbo Tax automatically calculates the SE Tax and Adjustment.

The SE Tax is to pay the FICA (Social Security & Medicare) that was not taken out like on your W2 wages.

[NCperson]

you pay income tax on your self-employment income just like you do on the regular W-2 income

then there is an additional self-employment tax of 15.3%, half of which is a deduction to your income.  That mimics the social security and Medicare tax that you have withheld as a W-2 employee. 

Stated another way, you are having your social security and Medicare tax withheld via your income tax return while W-2 employees have it withheld as part of their paycheck

Line 22 (actually Line 16) is the income tax on all your income.   Line 23 is the social security and medicare tax on your SE income. 

[VolvoGirl]

Here's the breakdown of the self employment tax.  

You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).

You are paying 15.3% for……

SS for employer 6.2%

SS for employee 6.2%

Medicare for employer 1.45%

Medicare for employee 1.45%

[NCperson]

SS for employer 6.2%

SS for employee 6.2%

Medicare for employer 1.45%

Medicare for employee 1.45%

as a W-2 employee you would have this withheld from your paycheck  (red)

your employer would pay this (blue), so the IRS gives it back to you as a deduction

[mprabs]

Thank you so much for the replies. This helps.