Under the Federal Insurance Contributions Act (FICA), 12.4 percent of your earned income up to an annual limit must be paid into Social Security, and an additional 2.9 percent must be paid into Medicare. (There are no income limits on Medicare taxes - so even if your income is well above the cap for Social Security tax, you will still owe Medicare tax on the total.)

If you're a wage or salaried employee, you pay only half the FICA bill (6.2 percent for Social Security + 1.45 percent for Medicare), and the tax is automatically withheld. Your employer must contribute the other half. For most people that means 7.65 percent of their paycheck is withheld and their company pays another 7.65 percent on their behalf.

If you're self-employed, however, you're expected to cough up both the employee and the employer share of FICA. You are, however, permitted to deduct half of this self-employment tax as a business expense.