Question
I'm self-employed as a sole proprietor. How do I report my income and pay Medicare and social security taxes?
Answer

The self-employment tax consists of the Old-Age, Survivors, and Disability Insurance (social security) and the Hospital Insurance (Medicare) taxes. The IRS will transmit the information from the Schedule SE to the Social Security Administration to figure your benefits under the social security system. See Publication 334, Tax Guide for Small Business.

Certain highly compensated individuals may need to figure and pay an additional Medicare tax on Form 8959, Additional Medicare Tax. Please refer to the Instructions for Form 8959.

Note: The federal tax system is a pay-as-you-go plan. Employers generally withhold taxes from employees' wages or salary before they pay them. However, payers generally don't withhold tax from payments they make to self-employed individuals. Therefore, you may need to make estimated tax payments. See Publication 505, Tax Withholding and Estimated Tax.