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2008 Tax Filing Software

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2008 Tax Filing Software

2008 tax filing software Publication 590 - Introductory Material Table of Contents What's New for 2013 What's New for 2014 Reminders IntroductionOrdering forms and publications. 2008 tax filing software Tax questions. 2008 tax filing software Useful Items - You may want to see: Note. 2008 tax filing software After 2013, Publication 590 will be split into two separate publications as follows. 2008 tax filing software Publication 590-A, will focus on contributions to traditional IRAs as well as Roth IRAs. 2008 tax filing software This publication will include the rules for rollover and conversion contributions. 2008 tax filing software Publication 590-B, will focus on distributions from traditional IRAs as well as Roth IRAs. 2008 tax filing software This publication will include the rules for required minimum distributions and IRA beneficiaries. 2008 tax filing software What's New for 2013 Traditional IRA contribution and deduction limit. 2008 tax filing software  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. 2008 tax filing software If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. 2008 tax filing software For more information, see How Much Can Be Contributed? in chapter 1. 2008 tax filing software Roth IRA contribution limit. 2008 tax filing software  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. 2008 tax filing software If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. 2008 tax filing software However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. 2008 tax filing software For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in chapter 2. 2008 tax filing software Modified AGI limit for traditional IRA contributions increased. 2008 tax filing software  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. 2008 tax filing software If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. 2008 tax filing software If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. 2008 tax filing software See How Much Can You Deduct? in chapter 1. 2008 tax filing software Modified AGI limit for Roth IRA contributions increased. 2008 tax filing software  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. 2008 tax filing software Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. 2008 tax filing software You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. 2008 tax filing software Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. 2008 tax filing software You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. 2008 tax filing software Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. 2008 tax filing software You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. 2008 tax filing software See Can You Contribute to a Roth IRA? in chapter 2. 2008 tax filing software Net Investment Income Tax. 2008 tax filing software  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). 2008 tax filing software However, these distributions are taken into account when determining the modified adjusted gross income threshold. 2008 tax filing software Distributions from a nonqualified retirement plan are included in net investment income. 2008 tax filing software See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. 2008 tax filing software Kay Bailey Hutchison Spousal IRA. 2008 tax filing software . 2008 tax filing software  In 2013, spousal IRAs were renamed to Kay Bailey Hutchison Spousal IRAs. 2008 tax filing software There are no changes to the rules regarding these IRAs. 2008 tax filing software See Kay Bailey Hutchison Spousal IRA Limit in chapter 1 for more information. 2008 tax filing software What's New for 2014 Modified AGI limit for traditional IRA contributions increased. 2008 tax filing software  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. 2008 tax filing software If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. 2008 tax filing software If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. 2008 tax filing software Modified AGI limit for Roth IRA contributions increased. 2008 tax filing software  For 2014, your Roth IRA contribution limit is reduced (phased out) in the following situations. 2008 tax filing software Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $181,000. 2008 tax filing software You cannot make a Roth IRA contribution if your modified AGI is $191,000 or more. 2008 tax filing software Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2014 and your modified AGI is at least $114,000. 2008 tax filing software You cannot make a Roth IRA contribution if your modified AGI is $129,000 or more. 2008 tax filing software Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. 2008 tax filing software You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. 2008 tax filing software Reminders Future developments. 2008 tax filing software  For the latest information about developments related to Publication 590, such as legislation enacted after it was published, go to www. 2008 tax filing software irs. 2008 tax filing software gov/pub590. 2008 tax filing software Simplified employee pension (SEP). 2008 tax filing software  SEP IRAs are not covered in this publication. 2008 tax filing software They are covered in Publication 560, Retirement Plans for Small Business. 2008 tax filing software Deemed IRAs. 2008 tax filing software  A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. 2008 tax filing software If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. 2008 tax filing software An employee's account can be treated as a traditional IRA or a Roth IRA. 2008 tax filing software For this purpose, a “qualified employer plan” includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), A tax-sheltered annuity plan (section 403(b) plan), and A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. 2008 tax filing software Contributions to both traditional and Roth IRAs. 2008 tax filing software  For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in chapter 2. 2008 tax filing software Statement of required minimum distribution (RMD). 2008 tax filing software  If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you, or offer to calculate it for you. 2008 tax filing software The report or offer must include the date by which the amount must be distributed. 2008 tax filing software The report is due January 31 of the year in which the minimum distribution is required. 2008 tax filing software It can be provided with the year-end fair market value statement that you normally get each year. 2008 tax filing software No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of owners who have died. 2008 tax filing software IRA interest. 2008 tax filing software  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. 2008 tax filing software Tax on your traditional IRA is generally deferred until you take a distribution. 2008 tax filing software Do not report this interest on your return as tax-exempt interest. 2008 tax filing software For more information on tax-exempt interest, see the instructions for your tax return. 2008 tax filing software Photographs of missing children. 2008 tax filing software  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2008 tax filing software Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2008 tax filing software 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. 2008 tax filing software Introduction This publication discusses individual retirement arrangements (IRAs). 2008 tax filing software An IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement. 2008 tax filing software What are some tax advantages of an IRA?   Two tax advantages of an IRA are that: Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you have and on your circumstances, and Generally, amounts in your IRA (including earnings and gains) are not taxed until distributed. 2008 tax filing software In some cases, amounts are not taxed at all if distributed according to the rules. 2008 tax filing software What's in this publication?   This publication discusses traditional, Roth, and SIMPLE IRAs. 2008 tax filing software It explains the rules for: Setting up an IRA, Contributing to an IRA, Transferring money or property to and from an IRA, Handling an inherited IRA, Receiving distributions (making withdrawals) from an IRA, and Taking a credit for contributions to an IRA. 2008 tax filing software   It also explains the penalties and additional taxes that apply when the rules are not followed. 2008 tax filing software To assist you in complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables, which can be found throughout the publication and in the appendices at the back of the publication. 2008 tax filing software How to use this publication. 2008 tax filing software   The rules that you must follow depend on which type of IRA you have. 2008 tax filing software Use Table I-1 to help you determine which parts of this publication to read. 2008 tax filing software Also use Table I-1 if you were referred to this publication from instructions to a form. 2008 tax filing software Comments and suggestions. 2008 tax filing software   We welcome your comments about this publication and your suggestions for future editions. 2008 tax filing software   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2008 tax filing software NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2008 tax filing software Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2008 tax filing software   You can send your comments from www. 2008 tax filing software irs. 2008 tax filing software gov/formspubs/. 2008 tax filing software Click on “More Information” and then on “Comment on Tax Forms and Publications”. 2008 tax filing software   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. 2008 tax filing software Ordering forms and publications. 2008 tax filing software   Visit www. 2008 tax filing software irs. 2008 tax filing software 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. 2008 tax filing software Internal Revenue Service 1201 N. 2008 tax filing software Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2008 tax filing software   If you have a tax question, check the information available on IRS. 2008 tax filing software gov or call 1-800-829-1040. 2008 tax filing software We cannot answer tax questions sent to either of the above addresses. 2008 tax filing software Useful Items - You may want to see: Publications 560 Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 571 Tax-Sheltered Annuity Plans (403(b) Plans) 575 Pension and Annuity Income 939 General Rule for Pensions and Annuities Forms (and instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2008 tax filing software 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-S SIMPLE Individual Retirement Trust Account 5305-SA SIMPLE Individual Retirement Custodial Account 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5498 IRA Contribution Information 8606 Nondeductible IRAs 8815 Exclusion of Interest From Series EE and I U. 2008 tax filing software S. 2008 tax filing software Savings Bonds Issued After 1989 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions See chapter 5 for information about getting these publications and forms. 2008 tax filing software Table I-1. 2008 tax filing software Using This Publication IF you need information on . 2008 tax filing software . 2008 tax filing software . 2008 tax filing software THEN see . 2008 tax filing software . 2008 tax filing software . 2008 tax filing software traditional IRAs chapter 1. 2008 tax filing software Roth IRAs chapter 2, and parts of  chapter 1. 2008 tax filing software SIMPLE IRAs chapter 3. 2008 tax filing software the credit for qualified retirement savings contributions (the saver's credit) chapter 4. 2008 tax filing software how to keep a record of your contributions to, and distributions from, your traditional IRA(s) appendix A. 2008 tax filing software SEP IRAs and 401(k) plans Publication 560. 2008 tax filing software Coverdell education savings accounts (formerly called education IRAs) Publication 970. 2008 tax filing software IF for 2013, you received social security benefits, had taxable compensation, contributed to a traditional IRA, and you or your spouse was covered by an employer retirement plan, and you want to. 2008 tax filing software . 2008 tax filing software . 2008 tax filing software THEN see . 2008 tax filing software . 2008 tax filing software . 2008 tax filing software first figure your modified adjusted gross income (AGI) appendix B, worksheet 1. 2008 tax filing software then figure how much of your traditional IRA contribution you can deduct appendix B, worksheet 2. 2008 tax filing software and finally figure how much of your social security is taxable appendix B, worksheet 3. 2008 tax filing software Table I-2. 2008 tax filing software How Are a Traditional IRA and a Roth IRA Different? This table shows the differences between traditional and Roth IRAs. 2008 tax filing software Answers in the middle column apply to traditional IRAs. 2008 tax filing software Answers in the right column apply to Roth IRAs. 2008 tax filing software Question Answer   Traditional IRA? Roth IRA? Is there an age limit on when I can open and contribute to a Yes. 2008 tax filing software You must not have reached age  70½ by the end of the year. 2008 tax filing software See Who Can Open a Traditional IRA? in chapter 1. 2008 tax filing software No. 2008 tax filing software You can be any age. 2008 tax filing software See Can You Contribute to a Roth IRA? in chapter 2. 2008 tax filing software If I earned more than $5,500 in 2013 ($6,500 if I was 50 or older by the end of 2013), is there a limit on how much I can contribute to a Yes. 2008 tax filing software For 2013, you can contribute to a traditional IRA up to: $5,500, or $6,500 if you were age 50 or older by the end of 2013. 2008 tax filing software  There is no upper limit on how much you can earn and still contribute. 2008 tax filing software See How Much Can Be Contributed? in chapter 1. 2008 tax filing software Yes. 2008 tax filing software For 2013, you may be able to contribute to a Roth IRA up to: $5,500, or $6,500 if you were age 50 or older by the end of 2013,  but the amount you can contribute may be less than that depending on your income, filing status, and if you contribute to another IRA. 2008 tax filing software See How Much Can Be Contributed? and Table 2-1 in chapter 2. 2008 tax filing software Can I deduct contributions to a Yes. 2008 tax filing software You may be able to deduct your contributions to a traditional IRA depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits. 2008 tax filing software See How Much Can You Deduct? in chapter 1. 2008 tax filing software No. 2008 tax filing software You can never deduct contributions to a Roth IRA. 2008 tax filing software See What Is a Roth IRA? in chapter 2. 2008 tax filing software Do I have to file a form just because I contribute to a Not unless you make nondeductible contributions to your traditional IRA. 2008 tax filing software In that case, you must file Form 8606. 2008 tax filing software See Nondeductible Contributions in chapter 1. 2008 tax filing software No. 2008 tax filing software You do not have to file a form if you contribute to a Roth IRA. 2008 tax filing software See Contributions not reported in chapter 2. 2008 tax filing software Do I have to start taking distributions when I reach a certain age from a Yes. 2008 tax filing software You must begin receiving required minimum distributions by April 1 of the year following the year you reach age 70½. 2008 tax filing software See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. 2008 tax filing software No. 2008 tax filing software If you are the original owner of a Roth IRA, you do not have to take distributions regardless of your age. 2008 tax filing software See Are Distributions Taxable? in chapter 2. 2008 tax filing software However, if you are the beneficiary of a Roth IRA, you may have to take distributions. 2008 tax filing software See Distributions After Owner's Death in chapter 2. 2008 tax filing software How are distributions taxed from a Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distribution is taxable. 2008 tax filing software See Are Distributions Taxable? in chapter 1. 2008 tax filing software Distributions from a Roth IRA are not taxed as long as you meet certain criteria. 2008 tax filing software See Are Distributions Taxable? in chapter 2. 2008 tax filing software Do I have to file a form just because I receive distributions from a Not unless you have ever made a nondeductible contribution to a traditional IRA. 2008 tax filing software If you have, file Form 8606. 2008 tax filing software See Nondeductible Contributions in chapter 1. 2008 tax filing software Yes. 2008 tax filing software File Form 8606 if you received distributions from a Roth IRA (other than a rollover, qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, certain qualified distributions, or a return of certain contributions). 2008 tax filing software Prev  Up  Next   Home   More Online Publications
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The 2008 Tax Filing Software

2008 tax filing software 10. 2008 tax filing software   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. 2008 tax filing software 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. 2008 tax filing software Use Schedule SE to figure net earnings from self-employment. 2008 tax filing software Sole proprietor or independent contractor. 2008 tax filing software   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. 2008 tax filing software SE tax rate. 2008 tax filing software    For 2013, the SE tax rate on net earnings is 15. 2008 tax filing software 3% (12. 2008 tax filing software 4% social security tax plus 2. 2008 tax filing software 9% Medicare tax). 2008 tax filing software Maximum earnings subject to self-employment tax. 2008 tax filing software    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. 2008 tax filing software 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. 2008 tax filing software   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. 2008 tax filing software 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. 2008 tax filing software   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. 2008 tax filing software 4% social security part of the SE tax on any of your net earnings. 2008 tax filing software However, you must pay the 2. 2008 tax filing software 9% Medicare part of the SE tax on all your net earnings. 2008 tax filing software Special Rules and Exceptions Aliens. 2008 tax filing software   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. 2008 tax filing software S. 2008 tax filing software citizens. 2008 tax filing software Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. 2008 tax filing software S. 2008 tax filing software social security system. 2008 tax filing software 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. 2008 tax filing software S. 2008 tax filing software residents for self-employment tax purposes. 2008 tax filing software For more information on aliens, see Publication 519, U. 2008 tax filing software S. 2008 tax filing software Tax Guide for Aliens. 2008 tax filing software Child employed by parent. 2008 tax filing software   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. 2008 tax filing software Church employee. 2008 tax filing software    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. 2008 tax filing software 28 or more in wages from the church or organization. 2008 tax filing software For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2008 tax filing software Fishing crew member. 2008 tax filing software   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. 2008 tax filing software 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. 2008 tax filing software The pay is not more than $100 per trip. 2008 tax filing software The pay is received only if there is a minimum catch. 2008 tax filing software The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. 2008 tax filing software You get a share of the catch or a share of the proceeds from the sale of the catch. 2008 tax filing software Your share depends on the amount of the catch. 2008 tax filing software The boat's operating crew normally numbers fewer than 10 individuals. 2008 tax filing software (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. 2008 tax filing software ) Notary public. 2008 tax filing software   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)). 2008 tax filing software State or local government employee. 2008 tax filing software   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. 2008 tax filing software Foreign government or international organization employee. 2008 tax filing software   You are subject to SE tax if both the following conditions are true. 2008 tax filing software You are a U. 2008 tax filing software S. 2008 tax filing software 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. 2008 tax filing software Your employer is not required to withhold social security and Medicare taxes from your wages. 2008 tax filing software U. 2008 tax filing software S. 2008 tax filing software citizen or resident alien residing abroad. 2008 tax filing software    If you are a self-employed U. 2008 tax filing software S. 2008 tax filing software citizen or resident alien living outside the United States, in most cases you must pay SE tax. 2008 tax filing software Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. 2008 tax filing software Exception. 2008 tax filing software    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. 2008 tax filing software Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. 2008 tax filing software 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. 2008 tax filing software   For more information, see the Instructions for Schedule SE (Form 1040). 2008 tax filing software 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. 2008 tax filing software A loss from one business reduces your profit from another business. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. 2008 tax filing software The regular method. 2008 tax filing software The nonfarm optional method. 2008 tax filing software The farm optional method. 2008 tax filing software You must use the regular method unless you are eligible to use one or both of the optional methods. 2008 tax filing software 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. 2008 tax filing software You want to receive credit for social security benefit coverage. 2008 tax filing software You incurred child or dependent care expenses for which you could claim a credit. 2008 tax filing software (An optional method may increase your earned income, which could increase your credit. 2008 tax filing software ) You are entitled to the earned income credit. 2008 tax filing software (An optional method may increase your earned income, which could increase your credit. 2008 tax filing software ) You are entitled to the additional child tax credit. 2008 tax filing software (An optional method may increase your earned income, which could increase your credit. 2008 tax filing software ) Effects of using an optional method. 2008 tax filing software   Using an optional method could increase your SE tax. 2008 tax filing software Paying more SE tax could result in your getting higher benefits when you retire. 2008 tax filing software   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. 2008 tax filing software   The optional methods may be used only to figure your SE tax. 2008 tax filing software To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. 2008 tax filing software Regular Method Multiply your total earnings subject to SE tax by 92. 2008 tax filing software 35% (. 2008 tax filing software 9235) to get your net earnings under the regular method. 2008 tax filing software See Short Schedule SE, line 4, or Long Schedule SE, line 4a. 2008 tax filing software Net earnings figured using the regular method are also called actual net earnings. 2008 tax filing software Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. 2008 tax filing software You may use this method if you meet all the following tests. 2008 tax filing software You are self-employed on a regular basis. 2008 tax filing software 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. 2008 tax filing software The net earnings can be from either farm or nonfarm earnings or both. 2008 tax filing software You have used this method less than 5 years. 2008 tax filing software (There is a 5-year lifetime limit. 2008 tax filing software ) The years do not have to be one after another. 2008 tax filing software Your net nonfarm profits were: Less than $5,024, and Less than 72. 2008 tax filing software 189% of your gross nonfarm income. 2008 tax filing software Net nonfarm profits. 2008 tax filing software   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). 2008 tax filing software   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. 2008 tax filing software Gross nonfarm income. 2008 tax filing software   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). 2008 tax filing software 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. 2008 tax filing software Table 10-1. 2008 tax filing software Figuring Nonfarm Net Earnings IF your gross nonfarm income is. 2008 tax filing software . 2008 tax filing software . 2008 tax filing software THEN your net earnings are equal to. 2008 tax filing software . 2008 tax filing software . 2008 tax filing software $6,960 or less Two-thirds of your gross nonfarm income. 2008 tax filing software More than $6,960 $4,640 Actual net earnings. 2008 tax filing software   Your actual net earnings are 92. 2008 tax filing software 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. 2008 tax filing software 35% (. 2008 tax filing software 9235) to get actual net earnings). 2008 tax filing software Actual net earnings are equivalent to net earnings figured using the regular method. 2008 tax filing software Optional net earnings less than actual net earnings. 2008 tax filing software   You cannot use this method to report an amount less than your actual net earnings from self-employment. 2008 tax filing software Gross nonfarm income of $6,960 or less. 2008 tax filing software   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. 2008 tax filing software Example 1. 2008 tax filing software Net nonfarm profit less than $5,024 and less than 72. 2008 tax filing software 189% of gross nonfarm income. 2008 tax filing software Ann Green runs a craft business. 2008 tax filing software Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. 2008 tax filing software She meets the test for being self-employed on a regular basis. 2008 tax filing software She has used the nonfarm optional method less than 5 years. 2008 tax filing software 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 × . 2008 tax filing software 9235). 2008 tax filing software Because her net profit is less than $5,024 and less than 72. 2008 tax filing software 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). 2008 tax filing software Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. 2008 tax filing software Example 2. 2008 tax filing software Net nonfarm profit less than $5,024 but not less than 72. 2008 tax filing software 189% of gross nonfarm income. 2008 tax filing software Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. 2008 tax filing software She must use the regular method to figure her net earnings. 2008 tax filing software She cannot use the nonfarm optional method because her net profit is not less than 72. 2008 tax filing software 189% of her gross income. 2008 tax filing software Example 3. 2008 tax filing software Net loss from a nonfarm business. 2008 tax filing software Assume that in Example 1 Ann has a net loss of $700. 2008 tax filing software She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. 2008 tax filing software Example 4. 2008 tax filing software Nonfarm net earnings less than $400. 2008 tax filing software Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. 2008 tax filing software 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. 2008 tax filing software Gross nonfarm income of more than $6,960. 2008 tax filing software   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. 2008 tax filing software Example 1. 2008 tax filing software Net nonfarm profit less than $5,024 and less than 72. 2008 tax filing software 189% of gross nonfarm income. 2008 tax filing software John White runs an appliance repair shop. 2008 tax filing software His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. 2008 tax filing software He meets the test for being self-employed on a regular basis. 2008 tax filing software He has used the nonfarm optional method less than 5 years. 2008 tax filing software 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 × . 2008 tax filing software 9235). 2008 tax filing software Because his net profit is less than $5,024 and less than 72. 2008 tax filing software 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. 2008 tax filing software Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. 2008 tax filing software Example 2. 2008 tax filing software Net nonfarm profit not less than $5,024. 2008 tax filing software Assume that in Example 1 John's net profit is $5,400. 2008 tax filing software He must use the regular method. 2008 tax filing software He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. 2008 tax filing software Example 3. 2008 tax filing software Net loss from a nonfarm business. 2008 tax filing software Assume that in Example 1 John has a net loss of $700. 2008 tax filing software He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. 2008 tax filing software Farm Optional Method Use the farm optional method only for earnings from a farming business. 2008 tax filing software See Publication 225 for information about this method. 2008 tax filing software 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. 2008 tax filing software To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. 2008 tax filing software Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. 2008 tax filing software Add the net earnings figured under each method to arrive at your total net earnings from self-employment. 2008 tax filing software You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. 2008 tax filing software If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. 2008 tax filing software Example. 2008 tax filing software You are a self-employed farmer. 2008 tax filing software You also operate a retail grocery store. 2008 tax filing software 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. 2008 tax filing software Table 10-2. 2008 tax filing software 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. 2008 tax filing software Method 1. 2008 tax filing software Using the regular method for both farm and nonfarm income. 2008 tax filing software Method 2. 2008 tax filing software Using the optional method for farm income and the regular method for nonfarm income. 2008 tax filing software Method 3. 2008 tax filing software Using the regular method for farm income and the optional method for nonfarm income. 2008 tax filing software Method 4. 2008 tax filing software Using the optional method for both farm and nonfarm income. 2008 tax filing software Note. 2008 tax filing software Actual net earnings is the same as net earnings figured using the regular method. 2008 tax filing software Table 10-3. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. 2008 tax filing software Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. 2008 tax filing software Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. 2008 tax filing software However, certain taxpayers must use Section B—Long Schedule SE. 2008 tax filing software 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. 2008 tax filing software Joint return. 2008 tax filing software   Even if you file a joint return, you cannot file a joint Schedule SE. 2008 tax filing software This is true whether one spouse or both spouses have earnings subject to SE tax. 2008 tax filing software If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. 2008 tax filing software 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. 2008 tax filing software Attach both schedules to the joint return. 2008 tax filing software More than one business. 2008 tax filing software   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. 2008 tax filing software A loss from one business will reduce your profit from another business. 2008 tax filing software File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. 2008 tax filing software Example. 2008 tax filing software You are the sole proprietor of two separate businesses. 2008 tax filing software You operate a restaurant that made a net profit of $25,000. 2008 tax filing software You also have a cabinetmaking business that had a net loss of $500. 2008 tax filing software 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. 2008 tax filing software You file Schedule SE showing total earnings subject to SE tax of $24,500. 2008 tax filing software Prev  Up  Next   Home   More Online Publications