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Ammend Tax Return

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Ammend Tax Return

Ammend tax return Publication 531 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionOrdering forms and publications. Ammend tax return Tax questions. Ammend tax return Future Developments For the latest information about developments related to Publication 531, such as legislation enacted after this publication was published, go to www. Ammend tax return irs. Ammend tax return gov/pub531. Ammend tax return What's New Additional Medicare Tax. Ammend tax return  Beginning in 2013, a 0. Ammend tax return 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Ammend tax return An employer is required to withhold Additional Medicare Tax on any Medicare wages or RRTA compensation it pays to an employee in excess of $200,000 in a calendar year without regard to the employee's filing status. Ammend tax return An employer is required to begin withholding Additional Medicare Tax in the pay period in which it pays wages or compensation in excess of $200,000 to an employee and continue to withhold it until the end of the calendar year. Ammend tax return Additional Medicare Tax is only imposed on the employee. Ammend tax return There is no employer share of Additional Medicare Tax. Ammend tax return All wages and compensation that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Ammend tax return Tips are subject to Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold. Ammend tax return Similarly, tips are subject to Additional Medicare Tax withholding, if, in combination with other RRTA compensation paid by the employer, they exceed the $200,000 withholding threshold. Ammend tax return For more information on Additional Medicare Tax, go to www. Ammend tax return irs. Ammend tax return gov and enter “Additional Medicare Tax” in the search box. Ammend tax return Reminder Photographs of missing children. Ammend tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Ammend tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Ammend tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Ammend tax return Introduction This publication is for employees who receive tips. Ammend tax return All tips you receive are income and are subject to federal income tax. Ammend tax return You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. Ammend tax return The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. Ammend tax return Reporting your tip income correctly is not difficult. Ammend tax return You must do three things. Ammend tax return Keep a daily tip record. Ammend tax return Report tips to your employer. Ammend tax return Report all your tips on your income tax return. Ammend tax return  This publication will explain these three things and show you what to do on your tax return if you have not done the first two. Ammend tax return This publication will also show you how to treat allocated tips. Ammend tax return Comments and suggestions. Ammend tax return   We welcome your comments about this publication and your suggestions for future editions. Ammend tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Ammend tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Ammend tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Ammend tax return   You can send your comments from www. Ammend tax return irs. Ammend tax return gov/formspubs/. Ammend tax return Click on “More Information” and then on “Comment on Tax Forms and Publications”. Ammend tax return   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Ammend tax return Ordering forms and publications. Ammend tax return   Visit www. Ammend tax return irs. Ammend tax return gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Ammend tax return Internal Revenue Service 1201 N. Ammend tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Ammend tax return   If you have a tax question, check the information available on IRS. Ammend tax return gov or call 1-800-829-1040. Ammend tax return We cannot answer tax questions sent to either of the above addresses. Ammend tax return Prev  Up  Next   Home   More Online Publications
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The Ammend Tax Return

Ammend tax return 12. Ammend tax return   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. Ammend tax return Name change. Ammend tax return Penalty for underpayment of estimated tax. Ammend tax return Who Must Pay Self-Employment Tax?Limited partner. Ammend tax return Community property. Ammend tax return 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. Ammend tax return  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Ammend tax return 4% to 12. Ammend tax return 4%. Ammend tax return The Medicare part of the tax remains at 2. Ammend tax return 9%. Ammend tax return As a result, the self-employment tax is increased from 13. Ammend tax return 3% to 15. Ammend tax return 3%. Ammend tax return Additional Medicare Tax. Ammend tax return . Ammend tax return  For tax years beginning in 2013, a 0. Ammend tax return 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Ammend tax return Use Form 8959, Additional Medicare Tax, to figure this tax. Ammend tax return For more information, see the Instructions for Form 8959. Ammend tax return Maximum net earnings. Ammend tax return  The maximum net self-employment earnings subject to the social security part (12. Ammend tax return 4%) of the self-employment tax increased to $113,700 for 2013. Ammend tax return There is no maximum limit on earnings subject to the Medicare part (2. Ammend tax return 9%). Ammend tax return What's New for 2014 Maximum net earnings. Ammend tax return  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. Ammend tax return Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Ammend tax return It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. Ammend tax return You usually have to pay SE tax if you are self-employed. Ammend tax return You are usually self-employed if you operate your own farm on land you either own or rent. Ammend tax return You have to figure SE tax on Schedule SE (Form 1040). Ammend tax return Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. Ammend tax return See chapter 13 for information on employment taxes. Ammend tax return Self-employment tax rate. Ammend tax return   For tax years beginning in 2013, the self-employment tax rate is 15. Ammend tax return 3%. Ammend tax return The rate consists of two parts: 12. Ammend tax return 4% for social security (old-age, survivors, and disability insurance) and 2. Ammend tax return 9% for Medicare (hospital insurance). Ammend tax return 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. Ammend tax return S. Ammend tax return Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. Ammend tax return S. Ammend tax return Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Ammend tax return See chapter 16 for information about getting publications and forms. Ammend tax return Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. Ammend tax return Your payments of SE tax contribute to your coverage under the social security system. Ammend tax return Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Ammend tax return How to become insured under social security. Ammend tax return   You must be insured under the social security system before you begin receiving social security benefits. Ammend tax return You are insured if you have the required number of credits (also called quarters of coverage). Ammend tax return Earning credits in 2013. Ammend tax return   You can earn a maximum of four credits per year. Ammend tax return For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. Ammend tax return 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. Ammend tax return It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. Ammend tax return 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. Ammend tax return socialsecurity. Ammend tax return gov. Ammend tax return Making false statements to get or to increase social security benefits may subject you to penalties. Ammend tax return The Social Security Administration (SSA) time limit for posting self-employment earnings. Ammend tax return   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. Ammend tax return    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. Ammend tax return The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. Ammend tax return 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). Ammend tax return This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. Ammend tax return An ITIN does not entitle you to social security benefits. Ammend tax return Obtaining an ITIN does not change your immigration or employment status under U. Ammend tax return S. Ammend tax return law. Ammend tax return Obtaining a social security number. Ammend tax return   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. Ammend tax return The application is also available in Spanish. Ammend tax return You can get this form at any Social Security office or by calling 1-800-772-1213. Ammend tax return    You can also download Form SS-5 from the Social Security Administration website at  www. Ammend tax return socialsecurity. Ammend tax return gov. Ammend tax return   If you have a social security number from the time you were an employee, you must use that number. Ammend tax return Do not apply for a new one. Ammend tax return Replacing a lost social security card. Ammend tax return   If you have a number but lost your card, file Form SS-5. Ammend tax return You will get a new card showing your original number, not a new number. Ammend tax return Name change. Ammend tax return   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. Ammend tax return Obtaining an individual taxpayer identification number. Ammend tax return   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. Ammend tax return To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. Ammend tax return You can get this form by calling 1-800-829-3676. Ammend tax return For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. Ammend tax return Form W-7 and Publication 1915 are also available in Spanish. Ammend tax return    You can also download Form W-7 from the IRS website at IRS. Ammend tax return gov. Ammend tax return Paying estimated tax. Ammend tax return   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. Ammend tax return 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. Ammend tax return Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. Ammend tax return   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. Ammend tax return For more information about estimated tax for farmers, see chapter 15. Ammend tax return Penalty for underpayment of estimated tax. Ammend tax return   You may have to pay a penalty if you do not pay enough estimated tax by its due date. Ammend tax return 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. Ammend tax return The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. Ammend tax return Aliens. Ammend tax return   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Ammend tax return S. Ammend tax return citizens. Ammend tax return Nonresident aliens are not subject to self-employment tax. Ammend tax return 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. Ammend tax return S. Ammend tax return residents for self-employment tax purposes. Ammend tax return For more information on aliens, see Publication 519, U. Ammend tax return S. Ammend tax return Tax Guide for Aliens. Ammend tax return 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. Ammend tax return A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. Ammend tax return Share farmer. Ammend tax return   You are a self-employed farmer under an income-sharing arrangement if both the following apply. Ammend tax return You produce a crop or raise livestock on land belonging to another person. Ammend tax return Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. Ammend tax return 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. Ammend tax return   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. Ammend tax return This will depend on whether the landowner has the right to direct or control your performance of services. Ammend tax return Example. Ammend tax return A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. Ammend tax return Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. Ammend tax return The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. Ammend tax return The share farmer is provided a house in which to live. Ammend tax return The landowner and the share farmer decide on a cropping plan. Ammend tax return 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. Ammend tax return The tax treatment of the landowner is discussed later under Landlord Participation in Farming. Ammend tax return Contract farming. Ammend tax return   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. Ammend tax return 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. Ammend tax return 4-H Club or FFA project. Ammend tax return   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. Ammend tax return Report the net income as “Other income” on line 21 of Form 1040. Ammend tax return If necessary, attach a statement showing the gross income and expenses. Ammend tax return 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. Ammend tax return Such a project is generally not considered a trade or business. Ammend tax return Partners in a partnership. Ammend tax return   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. Ammend tax return Limited partner. Ammend tax return   If you are a limited partner, your partnership income is generally not subject to SE tax. Ammend tax return 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). Ammend tax return Business Owned and Operated by Spouses. Ammend tax return   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. Ammend tax return You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. Ammend tax return 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. Ammend tax return Qualified joint venture. Ammend tax return   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. Ammend tax return For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. Ammend tax return   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. Ammend tax return Each of you must file a separate Schedule F and a separate Schedule SE. Ammend tax return For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). Ammend tax return Spouse employee. Ammend tax return   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. Ammend tax return For more information about employment taxes, see chapter 13. Ammend tax return Community property. Ammend tax return   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. Ammend tax return Do not treat any of your share as self-employment earnings of your spouse. Ammend tax return Figuring Self-Employment Earnings Farmer. Ammend tax return   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. Ammend tax return Partnership income or loss. Ammend tax return   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). Ammend tax return Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). Ammend tax return 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). Ammend tax return   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. Ammend tax return   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. Ammend tax return   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). Ammend tax return   For general information on partnerships, see Publication 541. Ammend tax return More than one business. Ammend tax return   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. Ammend tax return A loss from one business reduces your profit from another business. Ammend tax return 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. Ammend tax return Community property. Ammend tax return   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. Ammend tax return Lost income payments. Ammend tax return   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. Ammend tax return These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. Ammend tax return 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). Ammend tax return A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. Ammend tax return Gain or loss. Ammend tax return   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. Ammend tax return It does not matter whether the disposition is a sale, exchange, or involuntary conversion. Ammend tax return For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. Ammend tax return Investment property. Ammend tax return Depreciable property or other fixed assets used in your trade or business. Ammend tax return 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. Ammend tax return Unharvested standing crops sold with land held more than 1 year. Ammend tax return 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. Ammend tax return   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. Ammend tax return For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. Ammend tax return Wages and salaries. Ammend tax return   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. Ammend tax return   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. Ammend tax return Retired partner. Ammend tax return   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. Ammend tax return The retired partner performs no services for the partnership during the year. Ammend tax return The retired partner is owed only the retirement payments. Ammend tax return The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. Ammend tax return The payments to the retired partner are lifelong periodic payments. Ammend tax return Conservation Reserve Program (CRP) payments. Ammend tax return   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. Ammend tax return You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. Ammend tax return Cost share payments you receive may qualify for the costsharing exclusion. Ammend tax return See Cost-Sharing Exclusion (Improvements), above. Ammend tax return CRP payments are reported to you on Form 1099G. Ammend tax return Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Ammend tax return See the instructions for Schedule SE (Form 1040). Ammend tax return Self-employed health insurance deduction. Ammend tax return   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). Ammend tax return 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. Ammend tax return 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. Ammend tax return Crop shares. Ammend tax return   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. Ammend tax return Feeding such crop shares to livestock is considered using them. Ammend tax return Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. Ammend tax return Material participation for landlords. Ammend tax return   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. Ammend tax return You do at least three of the following. Ammend tax return Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. Ammend tax return Furnish at least half the tools, equipment, and livestock used in the production activities. Ammend tax return Advise or consult with your tenant. Ammend tax return Inspect the production activities periodically. Ammend tax return You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. Ammend tax return You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. Ammend tax return You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. Ammend tax return These tests may be used as general guides for determining whether you are a material participant. Ammend tax return Example. Ammend tax return Drew Houston agrees to produce a crop on J. Ammend tax return Clarke's cotton farm, with each receiving half the proceeds. Ammend tax return Clarke advises Houston when to plant, spray, and pick the cotton. Ammend tax return During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. Ammend tax return Houston furnishes all labor needed to grow and harvest the crop. Ammend tax return 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. Ammend tax return The income Clarke receives from his cotton farm is included in his self-employment earnings. Ammend tax return Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Ammend tax return The regular method. Ammend tax return The farm optional method. Ammend tax return The nonfarm optional method. Ammend tax return You must use the regular method unless you are eligible to use one or both of the optional methods. Ammend tax return See Figure 12-1 , shown later. Ammend tax return Figure 12-1. Ammend tax return Can I Use the Optional Methods? Please click here for the text description of the image. Ammend tax return Figure 12–1. Ammend tax return 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. Ammend tax return You want to receive credit for social security benefit coverage. Ammend tax return You incurred child or dependent care expenses for which you could claim a credit. Ammend tax return (An optional method may increase your earned income, which could increase your credit. Ammend tax return ) You are entitled to the earned income credit. Ammend tax return (An optional method may increase your earned income, which could increase your credit. Ammend tax return ) You are entitled to the additional child tax credit. Ammend tax return (An optional method may increase your earned income, which could increase your credit. Ammend tax return ) Effects of using an optional method. Ammend tax return   Using an optional method could increase your SE tax. Ammend tax return Paying more SE tax may result in you getting higher social security disability or retirement benefits. Ammend tax return   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. Ammend tax return   The optional methods may be used only to figure your SE tax. Ammend tax return To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. Ammend tax return Regular Method Multiply your total self-employment earnings by 92. Ammend tax return 35% (. Ammend tax return 9235) to get your net earnings under the regular method. Ammend tax return See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Ammend tax return Net earnings figured using the regular method are also called “actual net earnings. Ammend tax return ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. Ammend tax return You can use this method if you meet either of the following tests. Ammend tax return Your gross farm income is $6,960 or less. Ammend tax return Your net farm profits are less than $5,024. Ammend tax return Gross farm income. Ammend tax return   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). Ammend tax return Net farm profits. Ammend tax return   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). Ammend tax return 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. Ammend tax return For more information, see Partnership income or loss , earlier. Ammend tax return Figuring farm net earnings. Ammend tax return   If you meet either of the two tests explained above, use Table 12-1. Ammend tax return Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. Ammend tax return Table 12-1. Ammend tax return Figuring Farm Net Earnings IF your gross farm income  is. Ammend tax return . Ammend tax return . Ammend tax return THEN your net earnings are equal to. Ammend tax return . Ammend tax return . Ammend tax return $6,960 or less Two-thirds of your gross farm income. Ammend tax return More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. Ammend tax return   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. Ammend tax return Your actual net earnings are your net earnings figured using the regular method, explained earlier. Ammend tax return Example. Ammend tax return Your gross farm income is $540 and your net farm profit is $460. Ammend tax return Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. Ammend tax return 35% of $460). Ammend tax return You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. Ammend tax return Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. Ammend tax return If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. Ammend tax return 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. Ammend tax return For more information about the nonfarm optional method, see Publication 334. Ammend tax return You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. Ammend tax return 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. Ammend tax return You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Ammend tax return If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Ammend tax return Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Ammend tax return Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Ammend tax return Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. Ammend tax return However, certain taxpayers must use Section B–Long Schedule SE. Ammend tax return Use the chart on page 1 of Schedule SE to find out which one to use. Ammend tax return 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. Ammend tax return Deduction for employer-equivalent portion of self-employment tax. Ammend tax return   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. Ammend tax return This deduction only affects your income tax. Ammend tax return It does not affect either your net earnings from self-employment or your SE tax. Ammend tax return   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. Ammend tax return Joint return. Ammend tax return   Even if you file a joint return, you cannot file a joint Schedule SE. Ammend tax return This is true whether one spouse or both spouses have self-employment earnings. Ammend tax return Your spouse is not considered self-employed just because you are. Ammend tax return If both of you have self-employment earnings, each of you must complete a separate Schedule SE. Ammend tax return 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. Ammend tax return Attach both schedules to the joint return. Ammend tax return 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 . Ammend tax return Prev  Up  Next   Home   More Online Publications