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Free tax usa 12. Free tax usa   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. Free tax usa Name change. Free tax usa Penalty for underpayment of estimated tax. Free tax usa Who Must Pay Self-Employment Tax?Limited partner. Free tax usa Community property. Free tax usa 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. Free tax usa  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Free tax usa 4% to 12. Free tax usa 4%. Free tax usa The Medicare part of the tax remains at 2. Free tax usa 9%. Free tax usa As a result, the self-employment tax is increased from 13. Free tax usa 3% to 15. Free tax usa 3%. Free tax usa Additional Medicare Tax. Free tax usa . Free tax usa  For tax years beginning in 2013, a 0. Free tax usa 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Free tax usa Use Form 8959, Additional Medicare Tax, to figure this tax. Free tax usa For more information, see the Instructions for Form 8959. Free tax usa Maximum net earnings. Free tax usa  The maximum net self-employment earnings subject to the social security part (12. Free tax usa 4%) of the self-employment tax increased to $113,700 for 2013. Free tax usa There is no maximum limit on earnings subject to the Medicare part (2. Free tax usa 9%). Free tax usa What's New for 2014 Maximum net earnings. Free tax usa  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. Free tax usa Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Free tax usa It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. Free tax usa You usually have to pay SE tax if you are self-employed. Free tax usa You are usually self-employed if you operate your own farm on land you either own or rent. Free tax usa You have to figure SE tax on Schedule SE (Form 1040). Free tax usa Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. Free tax usa See chapter 13 for information on employment taxes. Free tax usa Self-employment tax rate. Free tax usa   For tax years beginning in 2013, the self-employment tax rate is 15. Free tax usa 3%. Free tax usa The rate consists of two parts: 12. Free tax usa 4% for social security (old-age, survivors, and disability insurance) and 2. Free tax usa 9% for Medicare (hospital insurance). Free tax usa 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. Free tax usa S. Free tax usa Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. Free tax usa S. Free tax usa Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Free tax usa See chapter 16 for information about getting publications and forms. Free tax usa Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. Free tax usa Your payments of SE tax contribute to your coverage under the social security system. Free tax usa Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Free tax usa How to become insured under social security. Free tax usa   You must be insured under the social security system before you begin receiving social security benefits. Free tax usa You are insured if you have the required number of credits (also called quarters of coverage). Free tax usa Earning credits in 2013. Free tax usa   You can earn a maximum of four credits per year. Free tax usa For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. Free tax usa 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. Free tax usa It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. Free tax usa 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. Free tax usa socialsecurity. Free tax usa gov. Free tax usa Making false statements to get or to increase social security benefits may subject you to penalties. Free tax usa The Social Security Administration (SSA) time limit for posting self-employment earnings. Free tax usa   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. Free tax usa    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. Free tax usa The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. Free tax usa 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). Free tax usa This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. Free tax usa An ITIN does not entitle you to social security benefits. Free tax usa Obtaining an ITIN does not change your immigration or employment status under U. Free tax usa S. Free tax usa law. Free tax usa Obtaining a social security number. Free tax usa   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. Free tax usa The application is also available in Spanish. Free tax usa You can get this form at any Social Security office or by calling 1-800-772-1213. Free tax usa    You can also download Form SS-5 from the Social Security Administration website at  www. Free tax usa socialsecurity. Free tax usa gov. Free tax usa   If you have a social security number from the time you were an employee, you must use that number. Free tax usa Do not apply for a new one. Free tax usa Replacing a lost social security card. Free tax usa   If you have a number but lost your card, file Form SS-5. Free tax usa You will get a new card showing your original number, not a new number. Free tax usa Name change. Free tax usa   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. Free tax usa Obtaining an individual taxpayer identification number. Free tax usa   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. Free tax usa To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. Free tax usa You can get this form by calling 1-800-829-3676. Free tax usa For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. Free tax usa Form W-7 and Publication 1915 are also available in Spanish. Free tax usa    You can also download Form W-7 from the IRS website at IRS. Free tax usa gov. Free tax usa Paying estimated tax. Free tax usa   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. Free tax usa 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. Free tax usa Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. Free tax usa   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. Free tax usa For more information about estimated tax for farmers, see chapter 15. Free tax usa Penalty for underpayment of estimated tax. Free tax usa   You may have to pay a penalty if you do not pay enough estimated tax by its due date. Free tax usa 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. Free tax usa The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. Free tax usa Aliens. Free tax usa   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Free tax usa S. Free tax usa citizens. Free tax usa Nonresident aliens are not subject to self-employment tax. Free tax usa 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. Free tax usa S. Free tax usa residents for self-employment tax purposes. Free tax usa For more information on aliens, see Publication 519, U. Free tax usa S. Free tax usa Tax Guide for Aliens. Free tax usa 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. Free tax usa A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. Free tax usa Share farmer. Free tax usa   You are a self-employed farmer under an income-sharing arrangement if both the following apply. Free tax usa You produce a crop or raise livestock on land belonging to another person. Free tax usa Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. Free tax usa 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. Free tax usa   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. Free tax usa This will depend on whether the landowner has the right to direct or control your performance of services. Free tax usa Example. Free tax usa A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. Free tax usa Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. Free tax usa The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. Free tax usa The share farmer is provided a house in which to live. Free tax usa The landowner and the share farmer decide on a cropping plan. Free tax usa 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. Free tax usa The tax treatment of the landowner is discussed later under Landlord Participation in Farming. Free tax usa Contract farming. Free tax usa   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. Free tax usa 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. Free tax usa 4-H Club or FFA project. Free tax usa   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. Free tax usa Report the net income as “Other income” on line 21 of Form 1040. Free tax usa If necessary, attach a statement showing the gross income and expenses. Free tax usa 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. Free tax usa Such a project is generally not considered a trade or business. Free tax usa Partners in a partnership. Free tax usa   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. Free tax usa Limited partner. Free tax usa   If you are a limited partner, your partnership income is generally not subject to SE tax. Free tax usa 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). Free tax usa Business Owned and Operated by Spouses. Free tax usa   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. Free tax usa You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. Free tax usa 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. Free tax usa Qualified joint venture. Free tax usa   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. Free tax usa For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. Free tax usa   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. Free tax usa Each of you must file a separate Schedule F and a separate Schedule SE. Free tax usa For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). Free tax usa Spouse employee. Free tax usa   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. Free tax usa For more information about employment taxes, see chapter 13. Free tax usa Community property. Free tax usa   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. Free tax usa Do not treat any of your share as self-employment earnings of your spouse. Free tax usa Figuring Self-Employment Earnings Farmer. Free tax usa   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. Free tax usa Partnership income or loss. Free tax usa   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). Free tax usa Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). Free tax usa 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). Free tax usa   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. Free tax usa   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. Free tax usa   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). Free tax usa   For general information on partnerships, see Publication 541. Free tax usa More than one business. Free tax usa   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. Free tax usa A loss from one business reduces your profit from another business. Free tax usa 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. Free tax usa Community property. Free tax usa   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. Free tax usa Lost income payments. Free tax usa   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. Free tax usa These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. Free tax usa 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). Free tax usa A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. Free tax usa Gain or loss. Free tax usa   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. Free tax usa It does not matter whether the disposition is a sale, exchange, or involuntary conversion. Free tax usa For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. Free tax usa Investment property. Free tax usa Depreciable property or other fixed assets used in your trade or business. Free tax usa 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. Free tax usa Unharvested standing crops sold with land held more than 1 year. Free tax usa 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. Free tax usa   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. Free tax usa For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. Free tax usa Wages and salaries. Free tax usa   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. Free tax usa   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. Free tax usa Retired partner. Free tax usa   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. Free tax usa The retired partner performs no services for the partnership during the year. Free tax usa The retired partner is owed only the retirement payments. Free tax usa The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. Free tax usa The payments to the retired partner are lifelong periodic payments. Free tax usa Conservation Reserve Program (CRP) payments. Free tax usa   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. Free tax usa You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. Free tax usa Cost share payments you receive may qualify for the costsharing exclusion. Free tax usa See Cost-Sharing Exclusion (Improvements), above. Free tax usa CRP payments are reported to you on Form 1099G. Free tax usa Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Free tax usa See the instructions for Schedule SE (Form 1040). Free tax usa Self-employed health insurance deduction. Free tax usa   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). Free tax usa 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. Free tax usa 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. Free tax usa Crop shares. Free tax usa   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. Free tax usa Feeding such crop shares to livestock is considered using them. Free tax usa Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. Free tax usa Material participation for landlords. Free tax usa   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. Free tax usa You do at least three of the following. Free tax usa Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. Free tax usa Furnish at least half the tools, equipment, and livestock used in the production activities. Free tax usa Advise or consult with your tenant. Free tax usa Inspect the production activities periodically. Free tax usa You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. Free tax usa You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. Free tax usa You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. Free tax usa These tests may be used as general guides for determining whether you are a material participant. Free tax usa Example. Free tax usa Drew Houston agrees to produce a crop on J. Free tax usa Clarke's cotton farm, with each receiving half the proceeds. Free tax usa Clarke advises Houston when to plant, spray, and pick the cotton. Free tax usa During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. Free tax usa Houston furnishes all labor needed to grow and harvest the crop. Free tax usa 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. Free tax usa The income Clarke receives from his cotton farm is included in his self-employment earnings. Free tax usa Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Free tax usa The regular method. Free tax usa The farm optional method. Free tax usa The nonfarm optional method. Free tax usa You must use the regular method unless you are eligible to use one or both of the optional methods. Free tax usa See Figure 12-1 , shown later. Free tax usa Figure 12-1. Free tax usa Can I Use the Optional Methods? Please click here for the text description of the image. Free tax usa Figure 12–1. Free tax usa 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. Free tax usa You want to receive credit for social security benefit coverage. Free tax usa You incurred child or dependent care expenses for which you could claim a credit. Free tax usa (An optional method may increase your earned income, which could increase your credit. Free tax usa ) You are entitled to the earned income credit. Free tax usa (An optional method may increase your earned income, which could increase your credit. Free tax usa ) You are entitled to the additional child tax credit. Free tax usa (An optional method may increase your earned income, which could increase your credit. Free tax usa ) Effects of using an optional method. Free tax usa   Using an optional method could increase your SE tax. Free tax usa Paying more SE tax may result in you getting higher social security disability or retirement benefits. Free tax usa   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. Free tax usa   The optional methods may be used only to figure your SE tax. Free tax usa To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. Free tax usa Regular Method Multiply your total self-employment earnings by 92. Free tax usa 35% (. Free tax usa 9235) to get your net earnings under the regular method. Free tax usa See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Free tax usa Net earnings figured using the regular method are also called “actual net earnings. Free tax usa ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. Free tax usa You can use this method if you meet either of the following tests. Free tax usa Your gross farm income is $6,960 or less. Free tax usa Your net farm profits are less than $5,024. Free tax usa Gross farm income. Free tax usa   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). Free tax usa Net farm profits. Free tax usa   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). Free tax usa 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. Free tax usa For more information, see Partnership income or loss , earlier. Free tax usa Figuring farm net earnings. Free tax usa   If you meet either of the two tests explained above, use Table 12-1. Free tax usa Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. Free tax usa Table 12-1. Free tax usa Figuring Farm Net Earnings IF your gross farm income  is. Free tax usa . Free tax usa . Free tax usa THEN your net earnings are equal to. Free tax usa . Free tax usa . Free tax usa $6,960 or less Two-thirds of your gross farm income. Free tax usa More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. Free tax usa   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. Free tax usa Your actual net earnings are your net earnings figured using the regular method, explained earlier. Free tax usa Example. Free tax usa Your gross farm income is $540 and your net farm profit is $460. Free tax usa Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. Free tax usa 35% of $460). Free tax usa You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. Free tax usa Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. Free tax usa If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. Free tax usa 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. Free tax usa For more information about the nonfarm optional method, see Publication 334. Free tax usa You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. Free tax usa 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. Free tax usa You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Free tax usa If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Free tax usa Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Free tax usa Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Free tax usa Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. Free tax usa However, certain taxpayers must use Section B–Long Schedule SE. Free tax usa Use the chart on page 1 of Schedule SE to find out which one to use. Free tax usa 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. Free tax usa Deduction for employer-equivalent portion of self-employment tax. Free tax usa   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. Free tax usa This deduction only affects your income tax. Free tax usa It does not affect either your net earnings from self-employment or your SE tax. Free tax usa   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. Free tax usa Joint return. Free tax usa   Even if you file a joint return, you cannot file a joint Schedule SE. Free tax usa This is true whether one spouse or both spouses have self-employment earnings. Free tax usa Your spouse is not considered self-employed just because you are. Free tax usa If both of you have self-employment earnings, each of you must complete a separate Schedule SE. Free tax usa 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. Free tax usa Attach both schedules to the joint return. Free tax usa 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 . Free tax usa Prev  Up  Next   Home   More Online Publications
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Time May be Running Out -- March 31 is an Important Deadline

IRS Health Care Tax Tip 2014-11, March 25, 2014                                                Español

Time May be Running Out – March 31 is an Important Deadline

Health Care Law Considerations for 2014

For most people, the Affordable Care Act has no effect on the 2013 income tax return they are filing in 2014. However, some people may need to make important decisions by the March 31, 2014 deadline for open enrollment. 

Below are five things about the health care law you may need to consider soon.

  • Currently Insured – No Change: If you already insured, you do not need to do anything more than continue your insurance.
  • Uninsured – Enroll by March 31: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more at HealthCare.gov.
  • Premium Tax Credit To Lower Your Monthly Premium: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014 so that the monthly premium you pay is lower, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you need to do nothing at this time unless you have a change in circumstance like a change in income or family size. Learn More.
  • Change in Circumstances: If you're receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to the Marketplace. Reporting changes will help to make sure you have the right coverage and are getting the proper amount of advance payments of the premium tax credit.
  • Individual Shared Responsibility Payment: Starting January 2014, you and your family have been required to have health care coverage or have an exemption from coverage.  Most people already have qualifying health care coverage.  These individuals will not need to do anything more than maintain that coverage throughout 2014. If you can afford coverage but decide not to buy it and remain uninsured, you may have to make an individual shared responsibility payment when you file your 2014 tax return in 2015. Learn More.

 

More Information

Find out more tax-related provisions of the health care law at IRS.gov/aca

Find out more about the Health Insurance Marketplace at HealthCare.gov.

To receive copies of IRS tax tips via email, subscribe at www.irs.gov/uac/Subscribe-to-IRS-Tax-Tips.

Page Last Reviewed or Updated: 26-Mar-2014

 

The Free Tax Usa

Free tax usa 7. Free tax usa   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. Free tax usa Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. Free tax usa You must determine gross profit before you can deduct any business expenses. Free tax usa These expenses are discussed in chapter 8. Free tax usa If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. Free tax usa Businesses that sell products. Free tax usa   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. Free tax usa Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). Free tax usa Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. Free tax usa   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). Free tax usa The result is the gross profit from your business. Free tax usa Businesses that sell services. Free tax usa   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. Free tax usa Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). Free tax usa Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. Free tax usa Illustration. Free tax usa   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. Free tax usa Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. Free tax usa Gross receipts. Free tax usa   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. Free tax usa You may find it helpful to use cash registers to keep track of receipts. Free tax usa You should also use a proper invoicing system and keep a separate bank account for your business. Free tax usa Sales tax collected. Free tax usa   Check to make sure your records show the correct sales tax collected. Free tax usa   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. Free tax usa   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. Free tax usa Inventory at beginning of year. Free tax usa   Compare this figure with last year's ending inventory. Free tax usa The two amounts should usually be the same. Free tax usa Purchases. Free tax usa   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. Free tax usa ) be sure to remove them from the cost of goods sold. Free tax usa For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. Free tax usa Inventory at end of year. Free tax usa   Check to make sure your procedures for taking inventory are adequate. Free tax usa These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. Free tax usa   Use inventory forms and adding machine tapes as the only evidence for your inventory. Free tax usa Inventory forms are available at office supply stores. Free tax usa These forms have columns for recording the description, quantity, unit price, and value of each inventory item. Free tax usa Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. Free tax usa These forms will help satisfy you that the total inventory is accurate. Free tax usa They will also provide you with a permanent record to support its validity. Free tax usa   Inventories are discussed in chapter 2. Free tax usa Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. Free tax usa First, divide gross profit by net receipts. Free tax usa The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. Free tax usa Next, compare this percentage to your markup policy. Free tax usa Little or no difference between these two percentages shows that your gross profit figure is accurate. Free tax usa A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. Free tax usa You should determine the reason for the difference. Free tax usa Example. Free tax usa   Joe Able operates a retail business. Free tax usa On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. Free tax usa The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. Free tax usa His cost of goods sold is $200,000. Free tax usa This results in a gross profit of $100,000 ($300,000 − $200,000). Free tax usa To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). Free tax usa The resulting 331/3% confirms his markup percentage of 331/3%. Free tax usa Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. Free tax usa The result is gross business income. Free tax usa If you use Schedule C-EZ, include the income on line 1 of the schedule. Free tax usa Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. Free tax usa Prev  Up  Next   Home   More Online Publications