8631. What is the self-employment tax? Who is liable for paying the self-employment tax?Alexis Longrcline212014-07-07T22:23:00Z2014-07-07T22:23:00Z1170975Summit Business Media821143148631. What is the self-employment tax? Who is liable for paying it?An individual whose net earnings from self-employment as an independent contractor equal $400 or more for the taxable year must pay the self-employment tax..IRC Sec. 6017. In 2014, an individual who is liable for the self-employment tax must file a Schedule SE and pay Social Security taxes on up to $117,000 of self-employment income ($113,700 for 2013). The hospital insurance tax is imposed on all of a taxpayer’s self-employment income. Despite this, an above-the-line deduction is permitted for one-half of the self-employment tax paid by an individual and attributable to a trade or business carried on by the individual as an independent contractor (not as an employee)..IRC Sec. 164(f). If the individual also works in covered employment as an employee, his self-employment income (subject to the self-employment tax) is only the difference, if any, between his “wages” as an employee and the maximum Social Security earnings base.See Q 8533 for a detailed discussion of the Social Security tax as it applies to self-employed individuals and Q 8535 for a discussion of estimated tax payments.