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Filing 2012 Taxes In 2013

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Filing 2012 Taxes In 2013

Filing 2012 taxes in 2013 Publication 936 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Filing 2012 taxes in 2013 Tax questions. Filing 2012 taxes in 2013 Useful Items - You may want to see: Reminders Future developments. Filing 2012 taxes in 2013  For the latest information about developments related to Publication 936, Home Mortgage Interest Deduction, such as legislation enacted after it was published, go to www. Filing 2012 taxes in 2013 irs. Filing 2012 taxes in 2013 gov/pub936. Filing 2012 taxes in 2013 Photographs of missing children. Filing 2012 taxes in 2013  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Filing 2012 taxes in 2013 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Introduction This publication discusses the rules for deducting home mortgage interest. Filing 2012 taxes in 2013 Part I contains general information on home mortgage interest, including points and mortgage insurance premiums. Filing 2012 taxes in 2013 It also explains how to report deductible interest on your tax return. Filing 2012 taxes in 2013 Part II explains how your deduction for home mortgage interest may be limited. Filing 2012 taxes in 2013 It contains Table 1, which is a worksheet you can use to figure the limit on your deduction. Filing 2012 taxes in 2013 Comments and suggestions. Filing 2012 taxes in 2013   We welcome your comments about this publication and your suggestions for future editions. Filing 2012 taxes in 2013   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Filing 2012 taxes in 2013 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Filing 2012 taxes in 2013 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Filing 2012 taxes in 2013   You can send your comments from www. Filing 2012 taxes in 2013 irs. Filing 2012 taxes in 2013 gov/formspubs. Filing 2012 taxes in 2013 Click on “More Information” and then on “Comment on Tax Forms and Publications. Filing 2012 taxes in 2013 ”   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. Filing 2012 taxes in 2013 Ordering forms and publications. Filing 2012 taxes in 2013   Visit www. Filing 2012 taxes in 2013 irs. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Internal Revenue Service 1201 N. Filing 2012 taxes in 2013 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Filing 2012 taxes in 2013   If you have a tax question, check the information available on IRS. Filing 2012 taxes in 2013 gov or call 1-800-829-1040. Filing 2012 taxes in 2013 We cannot answer tax questions sent to either of the above addresses. Filing 2012 taxes in 2013 Useful Items - You may want to see: Publication 523 Selling Your Home 527 Residential Rental Property 530 Tax Information for Homeowners 535 Business Expenses   See How To Get Tax Help near the end of this publication, for information about getting these publications. Filing 2012 taxes in 2013 Prev  Up  Next   Home   More Online Publications
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IRS Virtual Currency Guidance : Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply

IR-2014-36, March. 25, 2014

WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. 

Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted today on IRS.gov.

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The Filing 2012 Taxes In 2013

Filing 2012 taxes in 2013 12. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Name change. Filing 2012 taxes in 2013 Penalty for underpayment of estimated tax. Filing 2012 taxes in 2013 Who Must Pay Self-Employment Tax?Limited partner. Filing 2012 taxes in 2013 Community property. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Filing 2012 taxes in 2013 4% to 12. Filing 2012 taxes in 2013 4%. Filing 2012 taxes in 2013 The Medicare part of the tax remains at 2. Filing 2012 taxes in 2013 9%. Filing 2012 taxes in 2013 As a result, the self-employment tax is increased from 13. Filing 2012 taxes in 2013 3% to 15. Filing 2012 taxes in 2013 3%. Filing 2012 taxes in 2013 Additional Medicare Tax. Filing 2012 taxes in 2013 . Filing 2012 taxes in 2013  For tax years beginning in 2013, a 0. Filing 2012 taxes in 2013 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Filing 2012 taxes in 2013 Use Form 8959, Additional Medicare Tax, to figure this tax. Filing 2012 taxes in 2013 For more information, see the Instructions for Form 8959. Filing 2012 taxes in 2013 Maximum net earnings. Filing 2012 taxes in 2013  The maximum net self-employment earnings subject to the social security part (12. Filing 2012 taxes in 2013 4%) of the self-employment tax increased to $113,700 for 2013. Filing 2012 taxes in 2013 There is no maximum limit on earnings subject to the Medicare part (2. Filing 2012 taxes in 2013 9%). Filing 2012 taxes in 2013 What's New for 2014 Maximum net earnings. Filing 2012 taxes in 2013  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. Filing 2012 taxes in 2013 Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Filing 2012 taxes in 2013 It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. Filing 2012 taxes in 2013 You usually have to pay SE tax if you are self-employed. Filing 2012 taxes in 2013 You are usually self-employed if you operate your own farm on land you either own or rent. Filing 2012 taxes in 2013 You have to figure SE tax on Schedule SE (Form 1040). Filing 2012 taxes in 2013 Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. Filing 2012 taxes in 2013 See chapter 13 for information on employment taxes. Filing 2012 taxes in 2013 Self-employment tax rate. Filing 2012 taxes in 2013   For tax years beginning in 2013, the self-employment tax rate is 15. Filing 2012 taxes in 2013 3%. Filing 2012 taxes in 2013 The rate consists of two parts: 12. Filing 2012 taxes in 2013 4% for social security (old-age, survivors, and disability insurance) and 2. Filing 2012 taxes in 2013 9% for Medicare (hospital insurance). Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 S. Filing 2012 taxes in 2013 Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. Filing 2012 taxes in 2013 S. Filing 2012 taxes in 2013 Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Filing 2012 taxes in 2013 See chapter 16 for information about getting publications and forms. Filing 2012 taxes in 2013 Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. Filing 2012 taxes in 2013 Your payments of SE tax contribute to your coverage under the social security system. Filing 2012 taxes in 2013 Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Filing 2012 taxes in 2013 How to become insured under social security. Filing 2012 taxes in 2013   You must be insured under the social security system before you begin receiving social security benefits. Filing 2012 taxes in 2013 You are insured if you have the required number of credits (also called quarters of coverage). Filing 2012 taxes in 2013 Earning credits in 2013. Filing 2012 taxes in 2013   You can earn a maximum of four credits per year. Filing 2012 taxes in 2013 For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 socialsecurity. Filing 2012 taxes in 2013 gov. Filing 2012 taxes in 2013 Making false statements to get or to increase social security benefits may subject you to penalties. Filing 2012 taxes in 2013 The Social Security Administration (SSA) time limit for posting self-employment earnings. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013    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. Filing 2012 taxes in 2013 The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. Filing 2012 taxes in 2013 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). Filing 2012 taxes in 2013 This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. Filing 2012 taxes in 2013 An ITIN does not entitle you to social security benefits. Filing 2012 taxes in 2013 Obtaining an ITIN does not change your immigration or employment status under U. Filing 2012 taxes in 2013 S. Filing 2012 taxes in 2013 law. Filing 2012 taxes in 2013 Obtaining a social security number. Filing 2012 taxes in 2013   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. Filing 2012 taxes in 2013 The application is also available in Spanish. Filing 2012 taxes in 2013 You can get this form at any Social Security office or by calling 1-800-772-1213. Filing 2012 taxes in 2013    You can also download Form SS-5 from the Social Security Administration website at  www. Filing 2012 taxes in 2013 socialsecurity. Filing 2012 taxes in 2013 gov. Filing 2012 taxes in 2013   If you have a social security number from the time you were an employee, you must use that number. Filing 2012 taxes in 2013 Do not apply for a new one. Filing 2012 taxes in 2013 Replacing a lost social security card. Filing 2012 taxes in 2013   If you have a number but lost your card, file Form SS-5. Filing 2012 taxes in 2013 You will get a new card showing your original number, not a new number. Filing 2012 taxes in 2013 Name change. Filing 2012 taxes in 2013   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. Filing 2012 taxes in 2013 Obtaining an individual taxpayer identification number. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. Filing 2012 taxes in 2013 You can get this form by calling 1-800-829-3676. Filing 2012 taxes in 2013 For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. Filing 2012 taxes in 2013 Form W-7 and Publication 1915 are also available in Spanish. Filing 2012 taxes in 2013    You can also download Form W-7 from the IRS website at IRS. Filing 2012 taxes in 2013 gov. Filing 2012 taxes in 2013 Paying estimated tax. Filing 2012 taxes in 2013   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 For more information about estimated tax for farmers, see chapter 15. Filing 2012 taxes in 2013 Penalty for underpayment of estimated tax. Filing 2012 taxes in 2013   You may have to pay a penalty if you do not pay enough estimated tax by its due date. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. Filing 2012 taxes in 2013 Aliens. Filing 2012 taxes in 2013   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Filing 2012 taxes in 2013 S. Filing 2012 taxes in 2013 citizens. Filing 2012 taxes in 2013 Nonresident aliens are not subject to self-employment tax. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 S. Filing 2012 taxes in 2013 residents for self-employment tax purposes. Filing 2012 taxes in 2013 For more information on aliens, see Publication 519, U. Filing 2012 taxes in 2013 S. Filing 2012 taxes in 2013 Tax Guide for Aliens. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. Filing 2012 taxes in 2013 Share farmer. Filing 2012 taxes in 2013   You are a self-employed farmer under an income-sharing arrangement if both the following apply. Filing 2012 taxes in 2013 You produce a crop or raise livestock on land belonging to another person. Filing 2012 taxes in 2013 Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 This will depend on whether the landowner has the right to direct or control your performance of services. Filing 2012 taxes in 2013 Example. Filing 2012 taxes in 2013 A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. Filing 2012 taxes in 2013 Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. Filing 2012 taxes in 2013 The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. Filing 2012 taxes in 2013 The share farmer is provided a house in which to live. Filing 2012 taxes in 2013 The landowner and the share farmer decide on a cropping plan. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 The tax treatment of the landowner is discussed later under Landlord Participation in Farming. Filing 2012 taxes in 2013 Contract farming. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 4-H Club or FFA project. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Report the net income as “Other income” on line 21 of Form 1040. Filing 2012 taxes in 2013 If necessary, attach a statement showing the gross income and expenses. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Such a project is generally not considered a trade or business. Filing 2012 taxes in 2013 Partners in a partnership. Filing 2012 taxes in 2013   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. Filing 2012 taxes in 2013 Limited partner. Filing 2012 taxes in 2013   If you are a limited partner, your partnership income is generally not subject to SE tax. Filing 2012 taxes in 2013 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). Filing 2012 taxes in 2013 Business Owned and Operated by Spouses. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Qualified joint venture. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Each of you must file a separate Schedule F and a separate Schedule SE. Filing 2012 taxes in 2013 For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). Filing 2012 taxes in 2013 Spouse employee. Filing 2012 taxes in 2013   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. Filing 2012 taxes in 2013 For more information about employment taxes, see chapter 13. Filing 2012 taxes in 2013 Community property. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Do not treat any of your share as self-employment earnings of your spouse. Filing 2012 taxes in 2013 Figuring Self-Employment Earnings Farmer. Filing 2012 taxes in 2013   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. Filing 2012 taxes in 2013 Partnership income or loss. Filing 2012 taxes in 2013   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). Filing 2012 taxes in 2013 Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). Filing 2012 taxes in 2013 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). Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. Filing 2012 taxes in 2013   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). Filing 2012 taxes in 2013   For general information on partnerships, see Publication 541. Filing 2012 taxes in 2013 More than one business. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 A loss from one business reduces your profit from another business. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Community property. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Lost income payments. Filing 2012 taxes in 2013   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. Filing 2012 taxes in 2013 These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. Filing 2012 taxes in 2013 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). Filing 2012 taxes in 2013 A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. Filing 2012 taxes in 2013 Gain or loss. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 It does not matter whether the disposition is a sale, exchange, or involuntary conversion. Filing 2012 taxes in 2013 For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. Filing 2012 taxes in 2013 Investment property. Filing 2012 taxes in 2013 Depreciable property or other fixed assets used in your trade or business. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Unharvested standing crops sold with land held more than 1 year. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. Filing 2012 taxes in 2013 Wages and salaries. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. Filing 2012 taxes in 2013 Retired partner. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 The retired partner performs no services for the partnership during the year. Filing 2012 taxes in 2013 The retired partner is owed only the retirement payments. Filing 2012 taxes in 2013 The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. Filing 2012 taxes in 2013 The payments to the retired partner are lifelong periodic payments. Filing 2012 taxes in 2013 Conservation Reserve Program (CRP) payments. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. Filing 2012 taxes in 2013 Cost share payments you receive may qualify for the costsharing exclusion. Filing 2012 taxes in 2013 See Cost-Sharing Exclusion (Improvements), above. Filing 2012 taxes in 2013 CRP payments are reported to you on Form 1099G. Filing 2012 taxes in 2013 Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Filing 2012 taxes in 2013 See the instructions for Schedule SE (Form 1040). Filing 2012 taxes in 2013 Self-employed health insurance deduction. Filing 2012 taxes in 2013   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). Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Crop shares. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Feeding such crop shares to livestock is considered using them. Filing 2012 taxes in 2013 Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. Filing 2012 taxes in 2013 Material participation for landlords. Filing 2012 taxes in 2013   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. Filing 2012 taxes in 2013 You do at least three of the following. Filing 2012 taxes in 2013 Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. Filing 2012 taxes in 2013 Furnish at least half the tools, equipment, and livestock used in the production activities. Filing 2012 taxes in 2013 Advise or consult with your tenant. Filing 2012 taxes in 2013 Inspect the production activities periodically. Filing 2012 taxes in 2013 You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. Filing 2012 taxes in 2013 You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. Filing 2012 taxes in 2013 You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. Filing 2012 taxes in 2013 These tests may be used as general guides for determining whether you are a material participant. Filing 2012 taxes in 2013 Example. Filing 2012 taxes in 2013 Drew Houston agrees to produce a crop on J. Filing 2012 taxes in 2013 Clarke's cotton farm, with each receiving half the proceeds. Filing 2012 taxes in 2013 Clarke advises Houston when to plant, spray, and pick the cotton. Filing 2012 taxes in 2013 During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. Filing 2012 taxes in 2013 Houston furnishes all labor needed to grow and harvest the crop. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 The income Clarke receives from his cotton farm is included in his self-employment earnings. Filing 2012 taxes in 2013 Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Filing 2012 taxes in 2013 The regular method. Filing 2012 taxes in 2013 The farm optional method. Filing 2012 taxes in 2013 The nonfarm optional method. Filing 2012 taxes in 2013 You must use the regular method unless you are eligible to use one or both of the optional methods. Filing 2012 taxes in 2013 See Figure 12-1 , shown later. Filing 2012 taxes in 2013 Figure 12-1. Filing 2012 taxes in 2013 Can I Use the Optional Methods? Please click here for the text description of the image. Filing 2012 taxes in 2013 Figure 12–1. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 You want to receive credit for social security benefit coverage. Filing 2012 taxes in 2013 You incurred child or dependent care expenses for which you could claim a credit. Filing 2012 taxes in 2013 (An optional method may increase your earned income, which could increase your credit. Filing 2012 taxes in 2013 ) You are entitled to the earned income credit. Filing 2012 taxes in 2013 (An optional method may increase your earned income, which could increase your credit. Filing 2012 taxes in 2013 ) You are entitled to the additional child tax credit. Filing 2012 taxes in 2013 (An optional method may increase your earned income, which could increase your credit. Filing 2012 taxes in 2013 ) Effects of using an optional method. Filing 2012 taxes in 2013   Using an optional method could increase your SE tax. Filing 2012 taxes in 2013 Paying more SE tax may result in you getting higher social security disability or retirement benefits. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013   The optional methods may be used only to figure your SE tax. Filing 2012 taxes in 2013 To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. Filing 2012 taxes in 2013 Regular Method Multiply your total self-employment earnings by 92. Filing 2012 taxes in 2013 35% (. Filing 2012 taxes in 2013 9235) to get your net earnings under the regular method. Filing 2012 taxes in 2013 See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Filing 2012 taxes in 2013 Net earnings figured using the regular method are also called “actual net earnings. Filing 2012 taxes in 2013 ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. Filing 2012 taxes in 2013 You can use this method if you meet either of the following tests. Filing 2012 taxes in 2013 Your gross farm income is $6,960 or less. Filing 2012 taxes in 2013 Your net farm profits are less than $5,024. Filing 2012 taxes in 2013 Gross farm income. Filing 2012 taxes in 2013   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). Filing 2012 taxes in 2013 Net farm profits. Filing 2012 taxes in 2013   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). Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 For more information, see Partnership income or loss , earlier. Filing 2012 taxes in 2013 Figuring farm net earnings. Filing 2012 taxes in 2013   If you meet either of the two tests explained above, use Table 12-1. Filing 2012 taxes in 2013 Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. Filing 2012 taxes in 2013 Table 12-1. Filing 2012 taxes in 2013 Figuring Farm Net Earnings IF your gross farm income  is. Filing 2012 taxes in 2013 . Filing 2012 taxes in 2013 . Filing 2012 taxes in 2013 THEN your net earnings are equal to. Filing 2012 taxes in 2013 . Filing 2012 taxes in 2013 . Filing 2012 taxes in 2013 $6,960 or less Two-thirds of your gross farm income. Filing 2012 taxes in 2013 More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Your actual net earnings are your net earnings figured using the regular method, explained earlier. Filing 2012 taxes in 2013 Example. Filing 2012 taxes in 2013 Your gross farm income is $540 and your net farm profit is $460. Filing 2012 taxes in 2013 Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. Filing 2012 taxes in 2013 35% of $460). Filing 2012 taxes in 2013 You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. Filing 2012 taxes in 2013 Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. Filing 2012 taxes in 2013 If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 For more information about the nonfarm optional method, see Publication 334. Filing 2012 taxes in 2013 You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Filing 2012 taxes in 2013 If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Filing 2012 taxes in 2013 Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Filing 2012 taxes in 2013 Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Filing 2012 taxes in 2013 Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. Filing 2012 taxes in 2013 However, certain taxpayers must use Section B–Long Schedule SE. Filing 2012 taxes in 2013 Use the chart on page 1 of Schedule SE to find out which one to use. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Deduction for employer-equivalent portion of self-employment tax. Filing 2012 taxes in 2013   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. Filing 2012 taxes in 2013 This deduction only affects your income tax. Filing 2012 taxes in 2013 It does not affect either your net earnings from self-employment or your SE tax. Filing 2012 taxes in 2013   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. Filing 2012 taxes in 2013 Joint return. Filing 2012 taxes in 2013   Even if you file a joint return, you cannot file a joint Schedule SE. Filing 2012 taxes in 2013 This is true whether one spouse or both spouses have self-employment earnings. Filing 2012 taxes in 2013 Your spouse is not considered self-employed just because you are. Filing 2012 taxes in 2013 If both of you have self-employment earnings, each of you must complete a separate Schedule SE. Filing 2012 taxes in 2013 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. Filing 2012 taxes in 2013 Attach both schedules to the joint return. Filing 2012 taxes in 2013 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 . Filing 2012 taxes in 2013 Prev  Up  Next   Home   More Online Publications