Self Employed Contributions Act Tax - SECA Tax

AAA

DEFINITION of 'Self Employed Contributions Act Tax - SECA Tax'

A form of taxes that self-employed business owners must pay based on their net earnings from self-employment. Self Employed Contributions Act Tax (SECA Tax) was first imposed by the SEC Act of 1954.

Similar to the Federal Insurance Contributions Act Tax (FICA Tax) that employees pay, the payments fund Social Security, Old Age Survivors and Disability Insurance (OASDI) and Medicare programs.

INVESTOPEDIA EXPLAINS 'Self Employed Contributions Act Tax - SECA Tax'

The basic tax rate for SECA tax payments is twice the percentage rate that employees pay at source from their paychecks. This is to cover both the employer and employee portion of the payment. The employer portion of the payment, is deductible as a business expense.

If your net earnings are less than the minimum set each year, no SECA Tax is payable. If, however, your net earnings are above the minimum, you must pay SECA Tax on the entire amount (including the amount under the minimum).

RELATED TERMS
  1. Earnings

    The amount of profit that a company produces during a specific ...
  2. Withholding Tax

    1. Income tax withheld from employees' wages and paid directly ...
  3. Medicare

    A U.S. federal health program that subsidizes people who meet ...
  4. Social Security

    A United States federal program of social insurance and benefits ...
  5. Federal Insurance Contributions ...

    A U.S. law requiring a deduction from paychecks and income that ...
  6. IRS Publication 535 - Business ...

    A document published by the Internal Revenue Service (IRS) that ...
Related Articles
  1. Surviving The IRS Audit
    Taxes

    Surviving The IRS Audit

  2. Get A 6-Month Tax Extension
    Taxes

    Get A 6-Month Tax Extension

  3. Don't Put Off Your Year-End Tax Plan
    Taxes

    Don't Put Off Your Year-End Tax Plan

  4. 10 Tax Benefits For The Self-Employed ...
    Entrepreneurship

    10 Tax Benefits For The Self-Employed ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center