Frisco, Texas, has earned its reputation as a premier destination for innovation and independent business. From the creative freelancers working out of coffee shops in the Rail District to the independent consultants supporting corporate giants at Hall Park, the “solopreneur” spirit is the heartbeat of our local economy.
However, moving from a traditional W-2 job to working for yourself comes with a significant shift in financial responsibility. Perhaps the most misunderstood aspect of this transition is self employment tax. Unlike a traditional employee who sees taxes deducted automatically from their paycheck, an independent business owner must proactively calculate, budget for, and pay these obligations.
At FAS Accounting Services, located at 400 Stonebrook Pkwy, we specialize in helping Frisco’s self-employed professionals navigate the complexities of the tax code. In this guide, we will break down exactly how self employment tax works in 2026 and how you can optimize your business structure to keep more of your hard-earned money.
Simply put, self employment tax consists of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the FICA (Federal Insurance Contributions Act) taxes withheld from the pay of most wage earners.
When you are an employee, you pay half of these taxes (7.65%), and your employer pays the other half (7.65%). When you are self-employed, you are both the employer and the employee—meaning you are responsible for the full 15.3%.
The tax is broken down into two parts:
In the eyes of the Internal Revenue Service (IRS), you are generally subject to this tax if:
Whether you are a freelance graphic designer, a contractor, or a dental associate working as a 1099 professional in Frisco, these rules apply to you.
Living and working in Frisco, TX, offers a distinct financial advantage: Texas has no state income tax. However, it is a common misconception that “no state tax” means “no taxes.” While you save significantly on state-level filings compared to entrepreneurs in California or New York, your federal self employment tax remains a flat obligation regardless of which state you reside in. Furthermore, Frisco business owners must still stay mindful of Texas Franchise Tax if their revenue exceeds certain thresholds.
The 15.3% rate can feel like a heavy burden, but there are legal, strategic ways to minimize the impact on your bottom line.
For many Frisco business owners, transitioning from a Sole Proprietorship to an S-Corporation is the single most effective way to save on self employment tax.
Our team at FAS Accounting Services performs a “break-even analysis” for our clients to determine exactly when the tax savings of an S-Corp outweigh the additional administrative costs.
You only pay self employment tax on your net profit, not your gross revenue. Therefore, every legitimate business deduction reduces your tax bill. Common deductions for Frisco entrepreneurs include:
The IRS allows you to deduct 50% of your self employment tax from your gross income when calculating your adjusted gross income (AGI). While this doesn’t reduce the self employment tax itself, it lowers the amount of income tax you owe.
The U.S. tax system is “pay-as-you-go.” If you wait until April to pay your entire tax bill, you will likely face underpayment penalties. Frisco entrepreneurs should make Estimated Tax Payments four times a year:
Failing to plan for these payments is one of the most common IRS audit triggers we see. A sudden, large payment or a lack of quarterly history can flag your account for manual review.
You cannot accurately calculate your self employment tax if your books are a mess. If you are guessing at your expenses, you are likely either overpaying the government or setting yourself up for an audit.
Our bookkeeping clean up services are designed to go back through your records, categorize every transaction, and ensure that your “Net Profit” figure is 100% accurate. With clean books, you can use the Social Security Administration’s tools to estimate your future benefits and ensure your tax payments are precise.
Choosing a Frisco accountant means working with someone who understands the local business climate. We are familiar with the specific needs of North Texas business owners, from navigating property management accounting for local landlords to helping tech consultants near The Star.
Located at 400 Stonebrook Pkwy, we are easily accessible for face-to-face consultations, providing a level of personalized tax strategy that national “tax software” simply cannot replicate.
No. They are two separate taxes. You pay self employment tax to cover your Social Security and Medicare contributions. You pay income tax on your profits to fund general government operations. You owe both.
No. A standard single-member LLC is considered a “disregarded entity” by the IRS. You will still pay self employment tax on all profits. To reduce the tax, your LLC must elect to be treated as an S-Corporation.
You only pay self employment tax on your “side hustle” income. However, because you are already paying Social Security tax through your W-2 job, you may hit the Social Security wage cap faster, which could lower the percentage you owe on your self-employed earnings.
The general rule is that you multiply your net earnings by 92.35% to get your “taxable” self-employment income, then apply the 15.3% tax rate. Because this can be complex, we recommend using professional bookkeeping services to ensure accuracy.
The worst thing you can do is not file. Even if you can’t pay, file your return on time to avoid failure-to-file penalties. The IRS offers payment plans, and our team can help you negotiate these terms.
No. Statutory employees have their FICA taxes withheld by the employer, even though they are treated as self-employed for other tax purposes. Common examples include certain life insurance agents and commission drivers.
