Hi Louis,   Yes, you are required to pay the SE tax on your business gains --the good news is since you are working 40 hours per week a large portion of your SE tax may already be taken care of through your current employer (depending upon how much you make in your current job).   If your business is a sole proprieter, you may not be required to pay unemployement taxes.  As painful as this is Louis, you need to get a CPA (and stick with them) to help advise you on what you can and can't do.  There are a lot of small business CPA's who do not charge all that much for start-up small businesses.

Louis, first, congratulations on starting a business.  Second, to answer your question, please allow me to explain that the SE tax or self-employment tax is only the social security and Medicare portion of your overall Federal tax.   When you are an employee, you and your employer share the social security and Medicare tax liability.  However, when you are self-employed, you pay the entire social security and medicare tax liability.     Have no fear, the IRS is not penalizing you because you are self-employed as opposed to an employee.  You can deduct 50% of your SE tax on your tax return.  Also, the tax code does provide a maximum cap for the amount of social security and Medicare tax liability.  Only the first $105,000 of your COMBINED income is subject to the SE tax.  So, generally, once you have had $15,000 withheld as social security and Medicare tax from your day job, you have satisfied your SE obligation.   While I am a business attorney, do not take my word for this information.  Visit the IRS's self-employment tax page at http://www.irs.gov/businesses/small/article/0,,id=172179,00.html   Also remember that the SE tax is a small portion of your tax liability.  The other taxes that you are responsible for, as a small business owner are: 1. Federal income tax; and 2. Federal unemployment tax (if you qualify as an employee).   The IRS has a free webinar explaining business taxes.  Good luck.   Sharmil McKee sm@mckeeoffice.com Business Lawyer   McKee Law Office Philadelphia, PA www.MckeeOffice.com      

Louis, Welcome to the Community! The IRS website says that 'You must pay SE tax and file Schedule SE (Form 1040) if ... your net earnings from self-employment were $400 or more'. It seems like you probably do have to pay SE taxes on anything you earn from your side job, but I would suggest discussing this with a tax lawyer to be sure. Anyone out there in a similar situation?