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2012 free taxes online Publication 584-B - Introductory Material Table of Contents What's New Introduction What's New The IRS has created a page on IRS. 2012 free taxes online gov for information about Publication 584-B, at www. 2012 free taxes online irs. 2012 free taxes online gov/pub584b. 2012 free taxes online Information about any future developments affecting Publication 584-B (such as legislation enacted after we released it) will be posted on that page. 2012 free taxes online Introduction This workbook is designed to help you figure your loss on business and income-producing property in the event of a disaster, casualty, or theft. 2012 free taxes online It contains schedules to help you figure the loss to your office furniture and fixtures, information systems, motor vehicles, office supplies, buildings, and equipment. 2012 free taxes online These schedules, however, are for your information only. 2012 free taxes online You must complete Form 4684, Casualties and Thefts, to report your loss. 2012 free taxes online Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 04-Mar-2014

The 2012 Free Taxes Online

2012 free taxes online 12. 2012 free taxes online   Self-Employment Tax Table of Contents What's New for 2013 What's New for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Why Pay Self-Employment Tax? How To Pay Self-Employment TaxReplacing a lost social security card. 2012 free taxes online Name change. 2012 free taxes online Penalty for underpayment of estimated tax. 2012 free taxes online Who Must Pay Self-Employment Tax?Limited partner. 2012 free taxes online Community property. 2012 free taxes online Figuring Self-Employment EarningsLandlord Participation in Farming Methods for Figuring Net EarningsRegular Method Farm Optional Method Nonfarm Optional Method Using Both Optional Methods Reporting Self-Employment Tax What's New for 2013 Tax rates. 2012 free taxes online  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. 2012 free taxes online 4% to 12. 2012 free taxes online 4%. 2012 free taxes online The Medicare part of the tax remains at 2. 2012 free taxes online 9%. 2012 free taxes online As a result, the self-employment tax is increased from 13. 2012 free taxes online 3% to 15. 2012 free taxes online 3%. 2012 free taxes online Additional Medicare Tax. 2012 free taxes online . 2012 free taxes online  For tax years beginning in 2013, a 0. 2012 free taxes online 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. 2012 free taxes online Use Form 8959, Additional Medicare Tax, to figure this tax. 2012 free taxes online For more information, see the Instructions for Form 8959. 2012 free taxes online Maximum net earnings. 2012 free taxes online  The maximum net self-employment earnings subject to the social security part (12. 2012 free taxes online 4%) of the self-employment tax increased to $113,700 for 2013. 2012 free taxes online There is no maximum limit on earnings subject to the Medicare part (2. 2012 free taxes online 9%). 2012 free taxes online What's New for 2014 Maximum net earnings. 2012 free taxes online  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. 2012 free taxes online Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. 2012 free taxes online It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. 2012 free taxes online You usually have to pay SE tax if you are self-employed. 2012 free taxes online You are usually self-employed if you operate your own farm on land you either own or rent. 2012 free taxes online You have to figure SE tax on Schedule SE (Form 1040). 2012 free taxes online Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. 2012 free taxes online See chapter 13 for information on employment taxes. 2012 free taxes online Self-employment tax rate. 2012 free taxes online   For tax years beginning in 2013, the self-employment tax rate is 15. 2012 free taxes online 3%. 2012 free taxes online The rate consists of two parts: 12. 2012 free taxes online 4% for social security (old-age, survivors, and disability insurance) and 2. 2012 free taxes online 9% for Medicare (hospital insurance). 2012 free taxes online Topics - This chapter discusses: Why pay self-employment tax How to pay self-employment tax Who must pay self-employment tax Figuring self-employment earnings Landlord participation in farming Methods for figuring net earnings Reporting self-employment tax Useful Items - You may want to see: Publication 541 Partnerships Form (and Instructions) 1040 U. 2012 free taxes online S. 2012 free taxes online Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. 2012 free taxes online S. 2012 free taxes online Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. 2012 free taxes online See chapter 16 for information about getting publications and forms. 2012 free taxes online Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. 2012 free taxes online Your payments of SE tax contribute to your coverage under the social security system. 2012 free taxes online Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. 2012 free taxes online How to become insured under social security. 2012 free taxes online   You must be insured under the social security system before you begin receiving social security benefits. 2012 free taxes online You are insured if you have the required number of credits (also called quarters of coverage). 2012 free taxes online Earning credits in 2013. 2012 free taxes online   You can earn a maximum of four credits per year. 2012 free taxes online For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. 2012 free taxes online You need $4,640 ($1,160 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2013. 2012 free taxes online It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. 2012 free taxes online For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest Social Security Administration (SSA) office or visit the SSA website at www. 2012 free taxes online socialsecurity. 2012 free taxes online gov. 2012 free taxes online Making false statements to get or to increase social security benefits may subject you to penalties. 2012 free taxes online The Social Security Administration (SSA) time limit for posting self-employment earnings. 2012 free taxes online   Generally, the SSA will give you credit only for self-employment earnings reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. 2012 free taxes online    If you file your tax return or report a change in your self-employment earnings after the SSA time limit for posting self-employment earnings, the SSA may change its records, but only to remove or reduce the amount. 2012 free taxes online The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. 2012 free taxes online How To Pay Self-Employment Tax To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN). 2012 free taxes online This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. 2012 free taxes online An ITIN does not entitle you to social security benefits. 2012 free taxes online Obtaining an ITIN does not change your immigration or employment status under U. 2012 free taxes online S. 2012 free taxes online law. 2012 free taxes online Obtaining a social security number. 2012 free taxes online   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. 2012 free taxes online The application is also available in Spanish. 2012 free taxes online You can get this form at any Social Security office or by calling 1-800-772-1213. 2012 free taxes online    You can also download Form SS-5 from the Social Security Administration website at  www. 2012 free taxes online socialsecurity. 2012 free taxes online gov. 2012 free taxes online   If you have a social security number from the time you were an employee, you must use that number. 2012 free taxes online Do not apply for a new one. 2012 free taxes online Replacing a lost social security card. 2012 free taxes online   If you have a number but lost your card, file Form SS-5. 2012 free taxes online You will get a new card showing your original number, not a new number. 2012 free taxes online Name change. 2012 free taxes online   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. 2012 free taxes online Obtaining an individual taxpayer identification number. 2012 free taxes online   The IRS will issue you an ITIN, for tax use only, if you are a nonresident or resident alien and you do not have, and are not eligible to get, an SSN. 2012 free taxes online To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. 2012 free taxes online You can get this form by calling 1-800-829-3676. 2012 free taxes online For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. 2012 free taxes online Form W-7 and Publication 1915 are also available in Spanish. 2012 free taxes online    You can also download Form W-7 from the IRS website at IRS. 2012 free taxes online gov. 2012 free taxes online Paying estimated tax. 2012 free taxes online   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. 2012 free taxes online You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. 2012 free taxes online Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. 2012 free taxes online   However, if at least two-thirds of your gross income for 2013 or 2014 was from farming and you file your 2014 Form 1040 and pay all the tax due by March 2, 2015, you do not have to pay any estimated tax. 2012 free taxes online For more information about estimated tax for farmers, see chapter 15. 2012 free taxes online Penalty for underpayment of estimated tax. 2012 free taxes online   You may have to pay a penalty if you do not pay enough estimated tax by its due date. 2012 free taxes online Who Must Pay Self-Employment Tax? You must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. 2012 free taxes online The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. 2012 free taxes online Aliens. 2012 free taxes online   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. 2012 free taxes online S. 2012 free taxes online citizens. 2012 free taxes online Nonresident aliens are not subject to self-employment tax. 2012 free taxes online However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. 2012 free taxes online S. 2012 free taxes online residents for self-employment tax purposes. 2012 free taxes online For more information on aliens, see Publication 519, U. 2012 free taxes online S. 2012 free taxes online Tax Guide for Aliens. 2012 free taxes online Are you self-employed?   You are self-employed if you carry on a trade or business (such as running a farm) as a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself. 2012 free taxes online A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. 2012 free taxes online Share farmer. 2012 free taxes online   You are a self-employed farmer under an income-sharing arrangement if both the following apply. 2012 free taxes online You produce a crop or raise livestock on land belonging to another person. 2012 free taxes online Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. 2012 free taxes online Your net farm profit or loss from the income-sharing arrangement is reported on Schedule F (Form 1040) and included in your self-employment earnings. 2012 free taxes online   If you produce a crop or livestock on land belonging to another person and are to receive a specified rate of pay, a fixed sum of money, or a fixed quantity of the crop or livestock, and not a share of the crop or livestock or their proceeds, you may be either self-employed or an employee of the landowner. 2012 free taxes online This will depend on whether the landowner has the right to direct or control your performance of services. 2012 free taxes online Example. 2012 free taxes online A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. 2012 free taxes online Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. 2012 free taxes online The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. 2012 free taxes online The share farmer is provided a house in which to live. 2012 free taxes online The landowner and the share farmer decide on a cropping plan. 2012 free taxes online The share farmer is a self-employed farmer for purposes of the agreement to produce the crops, and the share farmer's part of the profit or loss from the crops is reported on Schedule F (Form 1040) and included in self-employment earnings. 2012 free taxes online The tax treatment of the landowner is discussed later under Landlord Participation in Farming. 2012 free taxes online Contract farming. 2012 free taxes online   Under typical contract farming arrangements, the grower receives a fixed payment per unit of crops or finished livestock delivered to the processor or packing company. 2012 free taxes online Since the grower typically furnishes labor and bears some production risk, the payments are reported on Schedule F and are therefore subject to self-employment tax. 2012 free taxes online 4-H Club or FFA project. 2012 free taxes online   If an individual participates in a 4-H Club or Future Farmers of America (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. 2012 free taxes online Report the net income as “Other income” on line 21 of Form 1040. 2012 free taxes online If necessary, attach a statement showing the gross income and expenses. 2012 free taxes online The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. 2012 free taxes online Such a project is generally not considered a trade or business. 2012 free taxes online Partners in a partnership. 2012 free taxes online   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. 2012 free taxes online Limited partner. 2012 free taxes online   If you are a limited partner, your partnership income is generally not subject to SE tax. 2012 free taxes online However, guaranteed payments you receive for services you perform for the partnership are subject to SE tax and should be reported to you in box 14 of your Schedule K-1 (Form 1065). 2012 free taxes online Business Owned and Operated by Spouses. 2012 free taxes online   If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. 2012 free taxes online You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. 2012 free taxes online Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. 2012 free taxes online Qualified joint venture. 2012 free taxes online   If you and your spouse each materially participate as the only members of a jointly owned and operated farm, and you file a joint tax return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. 2012 free taxes online For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. 2012 free taxes online   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 2012 free taxes online Each of you must file a separate Schedule F and a separate Schedule SE. 2012 free taxes online For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). 2012 free taxes online Spouse employee. 2012 free taxes online   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. 2012 free taxes online For more information about employment taxes, see chapter 13. 2012 free taxes online Community property. 2012 free taxes online   If you are a partner and your distributive share of any income or loss from a trade or business carried on by the partnership is community property, treat your share as your self-employment earnings. 2012 free taxes online Do not treat any of your share as self-employment earnings of your spouse. 2012 free taxes online Figuring Self-Employment Earnings Farmer. 2012 free taxes online   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. 2012 free taxes online Partnership income or loss. 2012 free taxes online   If you are a member of a partnership that carries on a trade or business, the partnership should report your self-employment earnings in box 14, code A, of your Schedule K-1 (Form 1065). 2012 free taxes online Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). 2012 free taxes online Use these amounts if you use the farm or nonfarm optional method to figure net earnings from self-employment (see Methods for Figuring Net Earnings , later). 2012 free taxes online   If you are a general partner, you may need to reduce these reported earnings by amounts you claim as a section 179 deduction, unreimbursed partnership expenses, or depletion on oil and gas properties. 2012 free taxes online   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. 2012 free taxes online   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). 2012 free taxes online   For general information on partnerships, see Publication 541. 2012 free taxes online More than one business. 2012 free taxes online   If you have self-employment earnings from more than one trade, business, or profession, you generally must combine the net profit or loss from each to determine your total self-employment earnings. 2012 free taxes online A loss from one business reduces your profit from another business. 2012 free taxes online However, do not combine earnings from farm and nonfarm businesses if you are using one of the optional methods (discussed later) to figure net earnings. 2012 free taxes online Community property. 2012 free taxes online   If any of the income from a farm or business, other than a partnership, is community property under state law, it is included in the self-employment earnings of the spouse carrying on the trade or business. 2012 free taxes online Lost income payments. 2012 free taxes online   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. 2012 free taxes online These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. 2012 free taxes online Even if you are not farming when you receive the payment, it is included in self-employment earnings if it relates to your farm business (even though it is temporarily inactive). 2012 free taxes online A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. 2012 free taxes online Gain or loss. 2012 free taxes online   A gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers is not included in self-employment earnings. 2012 free taxes online It does not matter whether the disposition is a sale, exchange, or involuntary conversion. 2012 free taxes online For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. 2012 free taxes online Investment property. 2012 free taxes online Depreciable property or other fixed assets used in your trade or business. 2012 free taxes online Livestock held for draft, breeding, sport, or dairy purposes, and not held primarily for sale, regardless of how long the livestock was held, or whether it was raised or purchased. 2012 free taxes online Unharvested standing crops sold with land held more than 1 year. 2012 free taxes online Timber, coal, or iron ore held for more than 1 year if an economic interest was retained, such as a right to receive coal royalties. 2012 free taxes online   A gain or loss from the cutting of timber is not included in self-employment earnings if the cutting is treated as a sale or exchange. 2012 free taxes online For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. 2012 free taxes online Wages and salaries. 2012 free taxes online   Wages and salaries received for services performed as an employee and covered by social security or railroad retirement are not included in self-employment earnings. 2012 free taxes online   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. 2012 free taxes online Retired partner. 2012 free taxes online   Retirement income received by a partner from his or her partnership under a written plan is not included in self-employment earnings if all the following apply. 2012 free taxes online The retired partner performs no services for the partnership during the year. 2012 free taxes online The retired partner is owed only the retirement payments. 2012 free taxes online The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. 2012 free taxes online The payments to the retired partner are lifelong periodic payments. 2012 free taxes online Conservation Reserve Program (CRP) payments. 2012 free taxes online   Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a longterm contract with the USDA, agreeing to convert to a less intensive use of that cropland. 2012 free taxes online You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. 2012 free taxes online Cost share payments you receive may qualify for the costsharing exclusion. 2012 free taxes online See Cost-Sharing Exclusion (Improvements), above. 2012 free taxes online CRP payments are reported to you on Form 1099G. 2012 free taxes online Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. 2012 free taxes online See the instructions for Schedule SE (Form 1040). 2012 free taxes online Self-employed health insurance deduction. 2012 free taxes online   You cannot deduct the self-employed health insurance deduction you report on Form 1040, line 29, from self-employment earnings on Schedule SE (Form 1040). 2012 free taxes online Landlord Participation in Farming As a general rule, income and deductions from rentals and from personal property leased with real estate are not included in determining self-employment earnings. 2012 free taxes online However, income and deductions from farm rentals, including government commodity program payments received by a landowner who rents land, are included if the rental arrangement provides that the landowner will, and does, materially participate in the production or management of production of the farm products on the land. 2012 free taxes online Crop shares. 2012 free taxes online   Rent paid in the form of crop shares is included in self-employment earnings for the year you sell, exchange, give away, or use the crop shares if you meet one of the four material participation tests (discussed next) at the time the crop shares are produced. 2012 free taxes online Feeding such crop shares to livestock is considered using them. 2012 free taxes online Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. 2012 free taxes online Material participation for landlords. 2012 free taxes online   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. 2012 free taxes online You do at least three of the following. 2012 free taxes online Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. 2012 free taxes online Furnish at least half the tools, equipment, and livestock used in the production activities. 2012 free taxes online Advise or consult with your tenant. 2012 free taxes online Inspect the production activities periodically. 2012 free taxes online You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. 2012 free taxes online You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. 2012 free taxes online You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. 2012 free taxes online These tests may be used as general guides for determining whether you are a material participant. 2012 free taxes online Example. 2012 free taxes online Drew Houston agrees to produce a crop on J. 2012 free taxes online Clarke's cotton farm, with each receiving half the proceeds. 2012 free taxes online Clarke advises Houston when to plant, spray, and pick the cotton. 2012 free taxes online During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. 2012 free taxes online Houston furnishes all labor needed to grow and harvest the crop. 2012 free taxes online The management decisions made by Clarke in connection with the care of the cotton crop and his regular inspection of the crop establish that he participates to a material degree in the cotton production operations. 2012 free taxes online The income Clarke receives from his cotton farm is included in his self-employment earnings. 2012 free taxes online Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. 2012 free taxes online The regular method. 2012 free taxes online The farm optional method. 2012 free taxes online The nonfarm optional method. 2012 free taxes online You must use the regular method unless you are eligible to use one or both of the optional methods. 2012 free taxes online See Figure 12-1 , shown later. 2012 free taxes online Figure 12-1. 2012 free taxes online Can I Use the Optional Methods? Please click here for the text description of the image. 2012 free taxes online Figure 12–1. 2012 free taxes online Can I Use the Optional Methods? Why use an optional method?   You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. 2012 free taxes online You want to receive credit for social security benefit coverage. 2012 free taxes online You incurred child or dependent care expenses for which you could claim a credit. 2012 free taxes online (An optional method may increase your earned income, which could increase your credit. 2012 free taxes online ) You are entitled to the earned income credit. 2012 free taxes online (An optional method may increase your earned income, which could increase your credit. 2012 free taxes online ) You are entitled to the additional child tax credit. 2012 free taxes online (An optional method may increase your earned income, which could increase your credit. 2012 free taxes online ) Effects of using an optional method. 2012 free taxes online   Using an optional method could increase your SE tax. 2012 free taxes online Paying more SE tax may result in you getting higher social security disability or retirement benefits. 2012 free taxes online   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller SE tax or no SE tax using the regular method. 2012 free taxes online   The optional methods may be used only to figure your SE tax. 2012 free taxes online To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. 2012 free taxes online Regular Method Multiply your total self-employment earnings by 92. 2012 free taxes online 35% (. 2012 free taxes online 9235) to get your net earnings under the regular method. 2012 free taxes online See Short Schedule SE, line 4, or Long Schedule SE, line 4a. 2012 free taxes online Net earnings figured using the regular method are also called “actual net earnings. 2012 free taxes online ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. 2012 free taxes online You can use this method if you meet either of the following tests. 2012 free taxes online Your gross farm income is $6,960 or less. 2012 free taxes online Your net farm profits are less than $5,024. 2012 free taxes online Gross farm income. 2012 free taxes online   Your gross farm income is the total of the amounts from: Schedule F (Form 1040), line 9, and Schedule K-1 (Form 1065), box 14, code B (from farm partnerships). 2012 free taxes online Net farm profits. 2012 free taxes online   Net farm profits generally are the total of the amounts from: Schedule F (Form 1040), line 34, and Schedule K-1 (Form 1065), box 14, code A (from farm partnerships). 2012 free taxes online However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. 2012 free taxes online For more information, see Partnership income or loss , earlier. 2012 free taxes online Figuring farm net earnings. 2012 free taxes online   If you meet either of the two tests explained above, use Table 12-1. 2012 free taxes online Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. 2012 free taxes online Table 12-1. 2012 free taxes online Figuring Farm Net Earnings IF your gross farm income  is. 2012 free taxes online . 2012 free taxes online . 2012 free taxes online THEN your net earnings are equal to. 2012 free taxes online . 2012 free taxes online . 2012 free taxes online $6,960 or less Two-thirds of your gross farm income. 2012 free taxes online More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. 2012 free taxes online   If your gross farm income is $6,960 or less and your farm net earnings figured under the farm optional method are less than your actual net earnings, you can use the farm optional method to reduce or eliminate your SE tax. 2012 free taxes online Your actual net earnings are your net earnings figured using the regular method, explained earlier. 2012 free taxes online Example. 2012 free taxes online Your gross farm income is $540 and your net farm profit is $460. 2012 free taxes online Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. 2012 free taxes online 35% of $460). 2012 free taxes online You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. 2012 free taxes online Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. 2012 free taxes online If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. 2012 free taxes online You can use this method even if you do not use the farm optional method for determining your farm net earnings and even if you have a net loss from your nonfarm business. 2012 free taxes online For more information about the nonfarm optional method, see Publication 334. 2012 free taxes online You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. 2012 free taxes online Using Both Optional Methods If you use both optional methods, you must add the net earnings figured under each method to arrive at your total net earnings from self-employment. 2012 free taxes online You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. 2012 free taxes online If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. 2012 free taxes online Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. 2012 free taxes online Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. 2012 free taxes online Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. 2012 free taxes online However, certain taxpayers must use Section B–Long Schedule SE. 2012 free taxes online Use the chart on page 1 of Schedule SE to find out which one to use. 2012 free taxes online If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. 2012 free taxes online Deduction for employer-equivalent portion of self-employment tax. 2012 free taxes online   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. 2012 free taxes online This deduction only affects your income tax. 2012 free taxes online It does not affect either your net earnings from self-employment or your SE tax. 2012 free taxes online   To deduct the tax, enter on Form 1040, line 27, the amount shown on Section A, Line 6, or Section B, line 13, Deduction for employer-equivalent portion of self-employment tax, of the Schedule SE. 2012 free taxes online Joint return. 2012 free taxes online   Even if you file a joint return, you cannot file a joint Schedule SE. 2012 free taxes online This is true whether one spouse or both spouses have self-employment earnings. 2012 free taxes online Your spouse is not considered self-employed just because you are. 2012 free taxes online If both of you have self-employment earnings, each of you must complete a separate Schedule SE. 2012 free taxes online However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. 2012 free taxes online Attach both schedules to the joint return. 2012 free taxes online If you and your spouse operate a business as a partnership, see Business Owned and Operated by Spouses and Qualified joint venture , earlier, under Who Must Pay Self-Employment Tax . 2012 free taxes 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