Why do I owe taxes when my deductions were more than what I made? I was self employed.

[HelenaC · Accepted solution]

You owe because you have to pay self-employment taxes, on the money you earn. Self-employment tax and income tax are two separate taxes. You can owe self-employment tax even if you don't need to pay income tax.

• Self-employment tax (SE tax) is the Social Security and Medicare tax paid by self-employed individuals. 
• It is similar to FICA which is the Social Security and Medicare taxes withheld from an employee’s paycheck.
• If you’re self-employed, you can claim a federal deduction for half the SE tax you pay, which can help lower your taxes.
• We report your SE tax on Schedule SE and also calculate the deduction that goes along with it.
• The SE tax rate is 15.3% with 12.4% for Social Security and 2.9% for Medicare.

When you’re self-employed, you are paid the full amount you earn. Nothing is deducted from your check for Social Security and Medicare taxes. Instead, you make estimated tax payments during the year to pay your SE tax and your income tax. If you don’t make estimated tax payments, then you pay these taxes when you file your return.

Related Information:

• Why am I paying self-employment tax?
• What is Schedule SE?

[coltonmorgan]

Thank you for the reply! TurboTax shows my owed taxes to be 893 for my SE income of 6318. It shows the SE deduction has half that (447). However, why does it still say I owe 893 when I go to file. Sorry, this is my first time doing my taxes personally.

[HelenaC]

Yes, it is very confusing. The 50% SE tax ( $447) is a deduction from income so you don't pay income taxes on $447 but you still have to pay the $447 for Self employment taxes.

[HelenaC]

If you’re self-employed, you can claim a federal deduction for half the SE tax you pay, which can help lower your income taxes.

[HelenaC]

Thank you for the Up vote. I appreciate it. Also, good luck with the rest of your taxes and have a great year!