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Irs E File 1040 Ez

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Irs E File 1040 Ez

Irs e file 1040 ez Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2012-23 Table of Contents SECTION 1. Irs e file 1040 ez PURPOSE SECTION 2. Irs e file 1040 ez BACKGROUND SECTION 3. Irs e file 1040 ez SCOPE SECTION 4. Irs e file 1040 ez APPLICATION. Irs e file 1040 ez 01 Limitations on Depreciation Deductions for Certain Automobiles. Irs e file 1040 ez . Irs e file 1040 ez 02 Inclusions in Income of Lessees of Passenger Automobiles. Irs e file 1040 ez SECTION 5. Irs e file 1040 ez EFFECTIVE DATE SECTION 6. Irs e file 1040 ez DRAFTING INFORMATION SECTION 1. Irs e file 1040 ez PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. Irs e file 1040 ez The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Irs e file 1040 ez SECTION 2. Irs e file 1040 ez BACKGROUND . Irs e file 1040 ez 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Irs e file 1040 ez For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Irs e file 1040 ez The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Irs e file 1040 ez This change reflects the higher rate of price inflation for trucks and vans since 1988. Irs e file 1040 ez . Irs e file 1040 ez 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Irs e file 1040 ez L. Irs e file 1040 ez No. Irs e file 1040 ez 111-312, 124 Stat. Irs e file 1040 ez 3296 (Dec. Irs e file 1040 ez 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Irs e file 1040 ez Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Irs e file 1040 ez . Irs e file 1040 ez 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Irs e file 1040 ez Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Irs e file 1040 ez Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). Irs e file 1040 ez Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Irs e file 1040 ez This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Irs e file 1040 ez . Irs e file 1040 ez 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Irs e file 1040 ez The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Irs e file 1040 ez Under § 1. Irs e file 1040 ez 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Irs e file 1040 ez One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Irs e file 1040 ez Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Irs e file 1040 ez SECTION 3. Irs e file 1040 ez SCOPE . Irs e file 1040 ez 01 The limitations on depreciation deductions in section 4. Irs e file 1040 ez 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. Irs e file 1040 ez . Irs e file 1040 ez 02 The tables in section 4. Irs e file 1040 ez 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. Irs e file 1040 ez Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Irs e file 1040 ez See Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2007-30, 2007-1 C. Irs e file 1040 ez B. Irs e file 1040 ez 1104, for passenger automobiles first leased during calendar year 2007; Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2008-22, 2008-1 C. Irs e file 1040 ez B. Irs e file 1040 ez 658, for passenger automobiles first leased during calendar year 2008; Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2009-24, 2009-17 I. Irs e file 1040 ez R. Irs e file 1040 ez B. Irs e file 1040 ez 885, for passenger automobiles first leased during calendar year 2009; Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2010-18, 2010-9 I. Irs e file 1040 ez R. Irs e file 1040 ez B. Irs e file 1040 ez 427, as amplified and modified by section 4. Irs e file 1040 ez 03 of Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2011-21, 2011-12 I. Irs e file 1040 ez R. Irs e file 1040 ez B. Irs e file 1040 ez 560, for passenger automobiles first leased during calendar year 2010; and Rev. Irs e file 1040 ez Proc. Irs e file 1040 ez 2011-21, for passenger automobiles first leased during calendar year 2011. Irs e file 1040 ez SECTION 4. Irs e file 1040 ez APPLICATION . Irs e file 1040 ez 01 Limitations on Depreciation Deductions for Certain Automobiles. Irs e file 1040 ez (1) Amount of the inflation adjustment. Irs e file 1040 ez (a) Passenger automobiles (other than trucks or vans). Irs e file 1040 ez Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Irs e file 1040 ez Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Irs e file 1040 ez The new car component of the CPI was 115. Irs e file 1040 ez 2 for October 1987 and 143. Irs e file 1040 ez 419 for October 2011. Irs e file 1040 ez The October 2011 index exceeded the October 1987 index by 28. Irs e file 1040 ez 219. Irs e file 1040 ez Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. Irs e file 1040 ez 5 percent (28. Irs e file 1040 ez 219/115. Irs e file 1040 ez 2 x 100%). Irs e file 1040 ez The dollar limitations in § 280F(a) are multiplied by a factor of 0. Irs e file 1040 ez 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. Irs e file 1040 ez This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. Irs e file 1040 ez (b) Trucks and vans. Irs e file 1040 ez To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. Irs e file 1040 ez The new truck component of the CPI was 112. Irs e file 1040 ez 4 for October 1987 and 146. Irs e file 1040 ez 607 for October 2011. Irs e file 1040 ez The October 2011 index exceeded the October 1987 index by 34. Irs e file 1040 ez 207. Irs e file 1040 ez Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. Irs e file 1040 ez 43 percent (34. Irs e file 1040 ez 207/112. Irs e file 1040 ez 4 x 100%). Irs e file 1040 ez The dollar limitations in § 280F(a) are multiplied by a factor of 0. Irs e file 1040 ez 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Irs e file 1040 ez This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. Irs e file 1040 ez (2) Amount of the limitation. Irs e file 1040 ez Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. Irs e file 1040 ez Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. Irs e file 1040 ez Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. Irs e file 1040 ez REV. Irs e file 1040 ez PROC. Irs e file 1040 ez 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Irs e file 1040 ez PROC. Irs e file 1040 ez 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Irs e file 1040 ez PROC. Irs e file 1040 ez 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Irs e file 1040 ez PROC. Irs e file 1040 ez 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Irs e file 1040 ez 02 Inclusions in Income of Lessees of Passenger Automobiles. Irs e file 1040 ez A taxpayer must follow the procedures in § 1. Irs e file 1040 ez 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. Irs e file 1040 ez In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Irs e file 1040 ez REV. Irs e file 1040 ez PROC. Irs e file 1040 ez 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. Irs e file 1040 ez PROC. Irs e file 1040 ez 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. Irs e file 1040 ez EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. Irs e file 1040 ez SECTION 6. Irs e file 1040 ez DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Irs e file 1040 ez Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Irs e file 1040 ez For further information regarding this revenue procedure, contact Mr. Irs e file 1040 ez Harvey at (202) 622-4930 (not a toll-free call). Irs e file 1040 ez Prev  Up  Next   Home   More Internal Revenue Bulletins
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Indications your identity may have been stolen and how to report it to us

Your identity may have been stolen if you receive a letter from the IRS stating or learn from a tax professional that ...

  1. ... you filed more than one tax return or someone has already filed using your information.

  2. ... you have a balance due, refund offset or have had collection actions taken against you for a year you did not file.

    and / or

  3. ... you received wages from an employer you have not worked for.

If you receive such a letter from the IRS and you suspect your identity has been stolen, respond immediately to the name, address, phone number or fax listed on the IRS letter or contact the IRS to determine if the letter is a legitimate IRS letter.

If you become the victim of identity theft outside of the tax system or believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity or credit report, etc., you are encouraged to contact the IRS at the Identity Protection Specialized Unit, toll-free at 1-800-908-4490 so we can take steps to further secure your account.

The IPSU hours of Operation: Monday – Friday, 7 a.m. - 7 p.m. your local time (Alaska & Hawaii follow Pacific Time).

You will need to fill out the IRS Identity Theft Affidavit, Form 14039. Please be sure to write legibly and follow the instructions on the back of the form.


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The Irs E File 1040 Ez

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