Independent contractors, freelancers, and small business owners in Illinois often face a specific tax obligation distinct from traditional employee withholdings. This levy covers Social Security and Medicare contributions, typically handled by employers for W-2 employees. For example, a graphic designer operating as a sole proprietor in Chicago would be responsible for these payments.
Meeting these financial obligations is crucial for access to future Social Security and Medicare benefits, including retirement income, disability coverage, and hospital insurance. Historically, this system ensures individuals contributing throughout their working years receive support during retirement or periods of disability. Understanding the nuances of this system is essential for accurate filing and avoidance of penalties.