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H&r Block 2010

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H&r block 2010 10. H&r block 2010   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. H&r block 2010 Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. H&r block 2010 Use Schedule SE to figure net earnings from self-employment. H&r block 2010 Sole proprietor or independent contractor. H&r block 2010   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. H&r block 2010 SE tax rate. H&r block 2010    For 2013, the SE tax rate on net earnings is 15. H&r block 2010 3% (12. H&r block 2010 4% social security tax plus 2. H&r block 2010 9% Medicare tax). H&r block 2010 Maximum earnings subject to self-employment tax. H&r block 2010    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. H&r block 2010 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. H&r block 2010   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. H&r block 2010 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. H&r block 2010   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. H&r block 2010 4% social security part of the SE tax on any of your net earnings. H&r block 2010 However, you must pay the 2. H&r block 2010 9% Medicare part of the SE tax on all your net earnings. H&r block 2010 Special Rules and Exceptions Aliens. H&r block 2010   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. H&r block 2010 S. H&r block 2010 citizens. H&r block 2010 Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. H&r block 2010 S. H&r block 2010 social security system. H&r block 2010 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. H&r block 2010 S. H&r block 2010 residents for self-employment tax purposes. H&r block 2010 For more information on aliens, see Publication 519, U. H&r block 2010 S. H&r block 2010 Tax Guide for Aliens. H&r block 2010 Child employed by parent. H&r block 2010   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. H&r block 2010 Church employee. H&r block 2010    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. H&r block 2010 28 or more in wages from the church or organization. H&r block 2010 For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. H&r block 2010 Fishing crew member. H&r block 2010   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. H&r block 2010 You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. H&r block 2010 The pay is not more than $100 per trip. H&r block 2010 The pay is received only if there is a minimum catch. H&r block 2010 The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. H&r block 2010 You get a share of the catch or a share of the proceeds from the sale of the catch. H&r block 2010 Your share depends on the amount of the catch. H&r block 2010 The boat's operating crew normally numbers fewer than 10 individuals. H&r block 2010 (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. H&r block 2010 ) Notary public. H&r block 2010   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). H&r block 2010 State or local government employee. H&r block 2010   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. H&r block 2010 Foreign government or international organization employee. H&r block 2010   You are subject to SE tax if both the following conditions are true. H&r block 2010 You are a U. H&r block 2010 S. H&r block 2010 citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. H&r block 2010 Your employer is not required to withhold social security and Medicare taxes from your wages. H&r block 2010 U. H&r block 2010 S. H&r block 2010 citizen or resident alien residing abroad. H&r block 2010    If you are a self-employed U. H&r block 2010 S. H&r block 2010 citizen or resident alien living outside the United States, in most cases you must pay SE tax. H&r block 2010 Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. H&r block 2010 Exception. H&r block 2010    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. H&r block 2010 Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. H&r block 2010 The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. H&r block 2010   For more information, see the Instructions for Schedule SE (Form 1040). H&r block 2010 More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. H&r block 2010 A loss from one business reduces your profit from another business. H&r block 2010 Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. H&r block 2010 Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. H&r block 2010 It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. H&r block 2010 Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. H&r block 2010 If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. H&r block 2010 Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. H&r block 2010 The regular method. H&r block 2010 The nonfarm optional method. H&r block 2010 The farm optional method. H&r block 2010 You must use the regular method unless you are eligible to use one or both of the optional methods. H&r block 2010 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. H&r block 2010 You want to receive credit for social security benefit coverage. H&r block 2010 You incurred child or dependent care expenses for which you could claim a credit. H&r block 2010 (An optional method may increase your earned income, which could increase your credit. H&r block 2010 ) You are entitled to the earned income credit. H&r block 2010 (An optional method may increase your earned income, which could increase your credit. H&r block 2010 ) You are entitled to the additional child tax credit. H&r block 2010 (An optional method may increase your earned income, which could increase your credit. H&r block 2010 ) Effects of using an optional method. H&r block 2010   Using an optional method could increase your SE tax. H&r block 2010 Paying more SE tax could result in your getting higher benefits when you retire. H&r block 2010   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 tax or no tax using the regular method. H&r block 2010   The optional methods may be used only to figure your SE tax. H&r block 2010 To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. H&r block 2010 Regular Method Multiply your total earnings subject to SE tax by 92. H&r block 2010 35% (. H&r block 2010 9235) to get your net earnings under the regular method. H&r block 2010 See Short Schedule SE, line 4, or Long Schedule SE, line 4a. H&r block 2010 Net earnings figured using the regular method are also called actual net earnings. H&r block 2010 Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. H&r block 2010 You may use this method if you meet all the following tests. H&r block 2010 You are self-employed on a regular basis. H&r block 2010 This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. H&r block 2010 The net earnings can be from either farm or nonfarm earnings or both. H&r block 2010 You have used this method less than 5 years. H&r block 2010 (There is a 5-year lifetime limit. H&r block 2010 ) The years do not have to be one after another. H&r block 2010 Your net nonfarm profits were: Less than $5,024, and Less than 72. H&r block 2010 189% of your gross nonfarm income. H&r block 2010 Net nonfarm profits. H&r block 2010   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). H&r block 2010   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. H&r block 2010 Gross nonfarm income. H&r block 2010   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). H&r block 2010 Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. H&r block 2010 Table 10-1. H&r block 2010 Figuring Nonfarm Net Earnings IF your gross nonfarm income is. H&r block 2010 . H&r block 2010 . H&r block 2010 THEN your net earnings are equal to. H&r block 2010 . H&r block 2010 . H&r block 2010 $6,960 or less Two-thirds of your gross nonfarm income. H&r block 2010 More than $6,960 $4,640 Actual net earnings. H&r block 2010   Your actual net earnings are 92. H&r block 2010 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. H&r block 2010 35% (. H&r block 2010 9235) to get actual net earnings). H&r block 2010 Actual net earnings are equivalent to net earnings figured using the regular method. H&r block 2010 Optional net earnings less than actual net earnings. H&r block 2010   You cannot use this method to report an amount less than your actual net earnings from self-employment. H&r block 2010 Gross nonfarm income of $6,960 or less. H&r block 2010   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. H&r block 2010 Example 1. H&r block 2010 Net nonfarm profit less than $5,024 and less than 72. H&r block 2010 189% of gross nonfarm income. H&r block 2010 Ann Green runs a craft business. H&r block 2010 Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. H&r block 2010 She meets the test for being self-employed on a regular basis. H&r block 2010 She has used the nonfarm optional method less than 5 years. H&r block 2010 Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . H&r block 2010 9235). H&r block 2010 Because her net profit is less than $5,024 and less than 72. H&r block 2010 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). H&r block 2010 Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. H&r block 2010 Example 2. H&r block 2010 Net nonfarm profit less than $5,024 but not less than 72. H&r block 2010 189% of gross nonfarm income. H&r block 2010 Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. H&r block 2010 She must use the regular method to figure her net earnings. H&r block 2010 She cannot use the nonfarm optional method because her net profit is not less than 72. H&r block 2010 189% of her gross income. H&r block 2010 Example 3. H&r block 2010 Net loss from a nonfarm business. H&r block 2010 Assume that in Example 1 Ann has a net loss of $700. H&r block 2010 She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. H&r block 2010 Example 4. H&r block 2010 Nonfarm net earnings less than $400. H&r block 2010 Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. H&r block 2010 In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. H&r block 2010 Gross nonfarm income of more than $6,960. H&r block 2010   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. H&r block 2010 Example 1. H&r block 2010 Net nonfarm profit less than $5,024 and less than 72. H&r block 2010 189% of gross nonfarm income. H&r block 2010 John White runs an appliance repair shop. H&r block 2010 His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. H&r block 2010 He meets the test for being self-employed on a regular basis. H&r block 2010 He has used the nonfarm optional method less than 5 years. H&r block 2010 His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . H&r block 2010 9235). H&r block 2010 Because his net profit is less than $5,024 and less than 72. H&r block 2010 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. H&r block 2010 Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. H&r block 2010 Example 2. H&r block 2010 Net nonfarm profit not less than $5,024. H&r block 2010 Assume that in Example 1 John's net profit is $5,400. H&r block 2010 He must use the regular method. H&r block 2010 He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. H&r block 2010 Example 3. H&r block 2010 Net loss from a nonfarm business. H&r block 2010 Assume that in Example 1 John has a net loss of $700. H&r block 2010 He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. H&r block 2010 Farm Optional Method Use the farm optional method only for earnings from a farming business. H&r block 2010 See Publication 225 for information about this method. H&r block 2010 Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. H&r block 2010 To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. H&r block 2010 Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. H&r block 2010 Add the net earnings figured under each method to arrive at your total net earnings from self-employment. H&r block 2010 You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. H&r block 2010 If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. H&r block 2010 Example. H&r block 2010 You are a self-employed farmer. H&r block 2010 You also operate a retail grocery store. H&r block 2010 Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. H&r block 2010 Table 10-2. H&r block 2010 Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. H&r block 2010 Method 1. H&r block 2010 Using the regular method for both farm and nonfarm income. H&r block 2010 Method 2. H&r block 2010 Using the optional method for farm income and the regular method for nonfarm income. H&r block 2010 Method 3. H&r block 2010 Using the regular method for farm income and the optional method for nonfarm income. H&r block 2010 Method 4. H&r block 2010 Using the optional method for both farm and nonfarm income. H&r block 2010 Note. H&r block 2010 Actual net earnings is the same as net earnings figured using the regular method. H&r block 2010 Table 10-3. H&r block 2010 Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. H&r block 2010 Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. H&r block 2010 Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. H&r block 2010 Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. H&r block 2010 Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. H&r block 2010 Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. H&r block 2010 However, certain taxpayers must use Section B—Long Schedule SE. H&r block 2010 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. H&r block 2010 Joint return. H&r block 2010   Even if you file a joint return, you cannot file a joint Schedule SE. H&r block 2010 This is true whether one spouse or both spouses have earnings subject to SE tax. H&r block 2010 If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. H&r block 2010 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. H&r block 2010 Attach both schedules to the joint return. H&r block 2010 More than one business. H&r block 2010   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. H&r block 2010 A loss from one business will reduce your profit from another business. H&r block 2010 File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. H&r block 2010 Example. H&r block 2010 You are the sole proprietor of two separate businesses. H&r block 2010 You operate a restaurant that made a net profit of $25,000. H&r block 2010 You also have a cabinetmaking business that had a net loss of $500. H&r block 2010 You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. H&r block 2010 You file Schedule SE showing total earnings subject to SE tax of $24,500. H&r block 2010 Prev  Up  Next   Home   More Online Publications
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The H&r Block 2010

H&r block 2010 15. H&r block 2010   Estimated Tax Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Special Estimated Tax Rules for Qualified FarmersQualified Farmer Special Rules for Qualified Farmers Estimated Tax Penalty for 2013 What's New Net Investment Income Tax. H&r block 2010 . H&r block 2010  For tax years beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). H&r block 2010 NIIT is a 3. H&r block 2010 8% tax on the lesser of net investment income or the excess of your modified adjusted gross income (MAGI) over the threshold amount. H&r block 2010 NIIT may need to be included when calculating your estimated tax. H&r block 2010 For more information, see Publication 505,Tax Withholding and Estimated Tax. H&r block 2010 Additional Medicare Tax. H&r block 2010  For tax years beginning in 2013, a 0. H&r block 2010 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income over a threshold amount based on your filing status. H&r block 2010 You may need to include this amount when figuring your estimated tax. H&r block 2010 For more information, see Publication 505. H&r block 2010 Introduction Estimated tax is the method used to pay tax on income that is not subject to withholding. H&r block 2010 See Publication 505 for the general rules and requirements for paying estimated tax. H&r block 2010 If you are a qualified farmer, defined below, you are subject to the special rules covered in this chapter for paying estimated tax. H&r block 2010 Topics - This chapter discusses: Special estimated tax rules for qualified farmers Estimated tax penalty Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax Form (and Instructions) 1040 U. H&r block 2010 S. H&r block 2010 Individual Income Tax Return 1040-ES Estimated Tax for Individuals 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 16 for information about getting publications and forms. H&r block 2010 Special Estimated Tax Rules for Qualified Farmers Special rules apply to the payment of estimated tax by individuals who are qualified farmers. H&r block 2010 If you are not a qualified farmer as defined next, see Publication 505 for the estimated tax rules that apply. H&r block 2010 Qualified Farmer An individual is a qualified farmer for 2013 if at least two-thirds of his or her gross income from all sources for 2012 or 2013 was from farming. H&r block 2010 See Gross Income , next, for information on how to figure your gross income from all sources and see Gross Income From Farming , later, for information on how to figure your gross income from farming. H&r block 2010 See also Percentage From Farming , later, for information on how to determine the percentage of your gross income from farming. H&r block 2010 Gross Income Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from income tax. H&r block 2010 On a joint return, you must add your spouse's gross income to your gross income. H&r block 2010 To decide whether two-thirds of your gross income was from farming, use as your gross income the total of the following income (not loss) amounts from your tax return. H&r block 2010 Wages, salaries, tips, etc. H&r block 2010 Taxable interest. H&r block 2010 Ordinary dividends. H&r block 2010 Taxable refunds, credits, or offsets of state and local income taxes. H&r block 2010 Alimony. H&r block 2010 Gross business income from Schedule C (Form 1040). H&r block 2010 Gross business receipts from Schedule C-EZ (Form 1040). H&r block 2010 Capital gains from Schedule D (Form 1040). H&r block 2010 Losses are not netted against gains. H&r block 2010 Gains on sales of business property. H&r block 2010 Taxable IRA distributions, pensions, annuities, and social security benefits. H&r block 2010 Gross rental income from Schedule E (Form 1040). H&r block 2010 Gross royalty income from Schedule E (Form 1040). H&r block 2010 Taxable net income from an estate or trust reported on Schedule E (Form 1040). H&r block 2010 Income from a Real Estate Mortgage Investment Conduit reported on Schedule E (Form 1040). H&r block 2010 Gross farm rental income from Form 4835. H&r block 2010 Gross farm income from Schedule F (Form 1040). H&r block 2010 Your distributive share of gross income from a partnership, or limited liability company treated as a partnership, from Schedule K-1 (Form 1065). H&r block 2010 Your pro rata share of gross income from an S corporation, from Schedule K-1 (Form 1120S). H&r block 2010 Unemployment compensation. H&r block 2010 Other income not included with any of the items listed above. H&r block 2010 Gross Income From Farming Gross income from farming is income from cultivating the soil or raising agricultural commodities. H&r block 2010 It includes the following amounts. H&r block 2010 Income from operating a stock, dairy, poultry, bee, fruit, or truck farm. H&r block 2010 Income from a plantation, ranch, nursery, range, orchard, or oyster bed. H&r block 2010 Crop shares for the use of your land. H&r block 2010 Gains from sales of draft, breeding, dairy, or sporting livestock. H&r block 2010 Gross income from farming is the total of the following amounts from your tax return. H&r block 2010 Gross farm income from Schedule F (Form 1040). H&r block 2010 Gross farm rental income from Form 4835. H&r block 2010 Gross farm income from Schedule E (Form 1040), Parts II and III. H&r block 2010 Gains from the sale of livestock used for draft, breeding, sport, or dairy purposes reported on Form 4797. H&r block 2010 For more information about income from farming, see chapter 3. H&r block 2010 Farm income does not include any of the following: Wages you receive as a farm employee. H&r block 2010 Income you receive from contract grain harvesting and hauling with workers and machines you furnish. H&r block 2010 Gains you receive from the sale of farm land and depreciable farm equipment. H&r block 2010 Percentage From Farming Figure your gross income from all sources, discussed earlier. H&r block 2010 Then figure your gross income from farming, discussed earlier. H&r block 2010 Divide your farm gross income by your total gross income to determine the percentage of gross income from farming. H&r block 2010 Example 1. H&r block 2010 Jane Smith had the following total gross income and farm gross income amounts in 2013. H&r block 2010 Gross Income   Total Farm Taxable interest $3,000   Dividends 500   Rental income (Sch E) 41,500   Farm income (Sch F) 75,000 $75,000 Gain (Form 4797) 5,000 5,000 Total $125,000 $80,000 Schedule D showed gain from the sale of dairy cows carried over from Form 4797 ($5,000) in addition to a loss from the sale of corporate stock ($2,000). H&r block 2010 However, that loss is not netted against the gain to figure Ms. H&r block 2010 Smith's total gross income or her gross farm income. H&r block 2010 Her gross farm income is 64% of her total gross income ($80,000 ÷ $125,000 = 0. H&r block 2010 64). H&r block 2010 Special Rules for Qualified Farmers The following special estimated tax rules apply if you are a qualified farmer for 2013. H&r block 2010 You do not have to pay estimated tax if you file your 2013 tax return and pay all the tax due by March 3, 2014. H&r block 2010 You do not have to pay estimated tax if your 2013 income tax withholding (including any amount applied to your 2013 estimated tax from your 2012 return) will be at least 662/3% (. H&r block 2010 6667) of the total tax shown on your 2013 tax return or 100% of the total tax shown on your 2012 return. H&r block 2010 If you must pay estimated tax, you are required to make only one estimated tax payment (your required annual payment) by January 15, 2014, using special rules to figure the amount of the payment. H&r block 2010 See Required Annual Payment , next, for details. H&r block 2010 Figure 15-1 presents an overview of the special estimated tax rules that apply to qualified farmers. H&r block 2010 Example 2. H&r block 2010 Assume the same fact as in Example 1. H&r block 2010 Ms. H&r block 2010 Smith's gross farm income is only 64% of her total income. H&r block 2010 Therefore, based on her 2013 income, she does not qualify to use the special estimated tax rules for qualified farmers. H&r block 2010 However, she does qualify if at least two-thirds of her 2012 gross income was from farming. H&r block 2010 Example 3. H&r block 2010 Assume the same facts as in Example 1 except that Ms. H&r block 2010 Smith's farm income from Schedule F was $90,000 instead of $75,000. H&r block 2010 This made her total gross income $140,000 ($3,000 + $500 + $41,500 + $90,000 + $5,000) and her farm gross income $95,000 ($90,000 + $5,000). H&r block 2010 She qualifies to use the special estimated tax rules for qualified farmers, since 67. H&r block 2010 9% (at least two-thirds) of her gross income is from farming ($95,000 ÷ $140,000 = . H&r block 2010 679). H&r block 2010 Required Annual Payment If you are a qualified farmer and must pay estimated tax for 2013, use the worksheet on Form 1040-ES to figure the amount of your required annual payment. H&r block 2010 Apply the following special rules for qualified farmers to the worksheet. H&r block 2010 On line 14a, multiply line 13c by 662/3% (. H&r block 2010 6667). H&r block 2010 On line 14b, enter 100% of the tax shown on your 2012 tax return regardless of the amount of your adjusted gross income. H&r block 2010 For this purpose, the “tax shown on your 2012 tax return” is the amount on line 61 of your 2012 return modified by certain adjustments. H&r block 2010 For more information, see chapter 4 of Publication 505. H&r block 2010 Estimated Tax Penalty for 2013 If you do not pay all your required estimated tax for 2013 by January 15, 2014, or file your 2013 return and pay any tax due by March 3, 2014, you may owe a penalty. H&r block 2010 Use Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to determine if you owe a penalty. H&r block 2010 See the instructions for Form 2210-F. H&r block 2010 Figure 15-1. H&r block 2010 Estimated Tax for Farmers Please click here for the text description of the image. H&r block 2010 Figure 2–A If you receive a penalty notice, do not ignore it, even if you think it is in error. H&r block 2010 You may get a penalty notice even though you filed your return on time, attached Form 2210-F, and met the gross-income-from-farming requirement. H&r block 2010 If you receive a penalty notice for underpaying estimated tax and you think it is in error, write to the address on the notice and explain why you think the notice is in error. H&r block 2010 Include a computation similar to the one in Example 1 (earlier), showing that you met the gross income from farming requirement. H&r block 2010 Prev  Up  Next   Home   More Online Publications