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My freetaxes com Publication 557 - Introductory Material Table of Contents What's New Reminders Introduction What's New Proposed regulations on “good faith determinations”. My freetaxes com  Proposed regulations modify standards for making a good faith determination that a foreign organization is a charitable organization, grants to which may be qualifying distributions and not taxable expenditures. My freetaxes com The proposed regulations identify a broader class of tax practitioners upon whose written advice a private foundation may base a “good faith determination. My freetaxes com ” See, Proposed Regulations: Reliance Standards for Making Good Faith Determinations, REG-134974-12, 2012-47 I. My freetaxes com R. My freetaxes com B. My freetaxes com 553. My freetaxes com Prop. My freetaxes com Regs. My freetaxes com on Good Faith Determinations. My freetaxes com New Requirements for section 501(c)(3) Hospitals Under the Affordable Care Act. My freetaxes com  The Affordable Care Act (ACA), enacted March 23, 2010, added new requirements that hospital organizations must satisfy in order to be described in section 501(c)(3), as well as new reporting requirements and excise taxes. My freetaxes com On June 22, 2012, the Service issued a notice of proposed rulemaking that addresses the new requirements enacted by the ACA applicable to section 501(c)(3) hospital organizations. My freetaxes com See, Proposed Regulations: Additional Requirements for Charitable Hospitals, REG-13026-11, 77 Fed. My freetaxes com Reg. My freetaxes com 38148. My freetaxes com On April 3, 2013, the Service issued proposed regulations on the ACA's community health needs assessment (CHNA) requirements. My freetaxes com The proposed regulations also discuss the related reporting and excise tax requirements for charitable hospitals and the consequences for failure to satisfy the section 501(r) requirements. My freetaxes com See, Proposed Regulations: Community Health Needs Assessments for Charitable Hospitals, REG-106499-12, 78 Fed. My freetaxes com Reg. My freetaxes com 20,523. My freetaxes com Timing of when an Organization is exempt for Federal Tax Purposes. My freetaxes com  As noted in section 2. My freetaxes com 03(4) of Revenue Procedure 2013-9, 2013-2 I. My freetaxes com R. My freetaxes com B. My freetaxes com 267, the provisions in section 11. My freetaxes com 01 regarding the effect of determination letters or rulings recognizing exempt status of organizations described in section 501(c), other than sections 501(c)(3), (9), (17), and (29), have been revised. My freetaxes com Prior to this year, and back to 1962, when such organizations applied for recognition, the IRS would usually recognize the organizations as tax exempt from the date of formation, no matter how long the interval between the date of formation and the date of application. My freetaxes com In addition to the practical difficulties of ascertaining an organization's purposes and activities for this period, such recognition is now potentially inconsistent with the provisions of section 6033(j), which automatically revokes the exempt status of an organization that fails to file required Form 990 series returns or notices for three consecutive years. My freetaxes com The new procedure adopts a practice similar to the rule for section 501(c)(3) organizations for these organizations, generally permitting recognition from the date of formation if the organization has: always met the requirements for exemption, has applied within 27 months from the end of the month in which it was organized, and has not failed to file required Form 990 series returns or notices for three consecutive years. My freetaxes com Section 11. My freetaxes com 01(3) notes: an organization that otherwise meets the requirements for tax-exempt status and the issuance of a determination letter or ruling that does not meet the requirements for recognition from date of formation will generally be recognized from the postmark date of its application. My freetaxes com Exempt Organizations Select Check. My freetaxes com  The IRS has developed an on-line search tool, Exempt Organizations Select Check, that allows users to select an exempt organization and check certain information about its federal tax status and filings. My freetaxes com It consolidates three former search sites into one, providing expanded search capability and a more efficient way to search for organizations that: Are eligible to receive tax-deductible charitable contributions (Publication 78 data). My freetaxes com Users may rely on this list in determining deductibility of contributions, just as they did when Publication 78 was a separate electronic publication rather than part of Select Check. My freetaxes com Have had their tax-exempt status automatically revoked under the law because they have not filed Form 990 series returns or notices annually as required for three consecutive years (Auto-Revocation List). My freetaxes com Have filed a Form 990-N (e-Postcard) annual electronic notice. My freetaxes com  In addition to searching for a particular organization, users may download a complete list of each of the three types of organizations through Exempt Organizations Select Check. My freetaxes com See also Revenue Procedure 2011-33, 2011-25 I. My freetaxes com R. My freetaxes com B. My freetaxes com 887. My freetaxes com Future developments. My freetaxes com . My freetaxes com  The IRS has created a page on IRS. My freetaxes com gov for information about Publication 557, at www. My freetaxes com irs. My freetaxes com gov/pub557. My freetaxes com Information about any future developments affecting Publication 557 (such as legislation enacted after we release it) will be posted on that page. My freetaxes com Reminders The Patient Protection and Affordable Care Act (ACA). My freetaxes com   The ACA added several new laws. My freetaxes com This includes a new excise tax on indoor tanning services, a small business health care tax credit, additional requirements for tax-exempt hospitals, and the section 501(c)(29) CO-OP program. My freetaxes com For more information, go to IRS. My freetaxes com gov and select Affordable Care Act Tax Provisions. My freetaxes com Electronic filing requirement for large organizations. My freetaxes com  For tax years ending on or after December 31, 2006, only organizations that file 250 returns during the calendar year and that have total assets of $10 million or more are required to file Form 990 electronically. My freetaxes com For more information, go to e-file for Charities and Non-Profits. My freetaxes com Section 501(c)(15) gross receipts. My freetaxes com   The definition of gross receipts for purposes of determining whether small insurance companies qualify as tax-exempt under section 501(c)(15) has changed. My freetaxes com See Notice 2006-42, 2006-19 I. My freetaxes com R. My freetaxes com B. My freetaxes com 878, Notice 2006-42. My freetaxes com Prohibited tax shelter transactions. My freetaxes com  New excise taxes are imposed under section 4965 on certain tax-exempt organizations entering into prohibited tax shelter transactions. My freetaxes com See T. My freetaxes com D. My freetaxes com 9492, Excise Taxes on Prohibited Tax Shelter Transactions and Related Disclosure Requirements, 2010-33 I. My freetaxes com R. My freetaxes com B. My freetaxes com 242. My freetaxes com See IRS Issues Final Regulations Regarding Excise Taxes on Prohibited Tax Shelter Transactions and Related Disclosure Requirement. My freetaxes com Pension Protection Act of 2006 tax changes. My freetaxes com  The Pension Protection Act of 2006 made numerous changes to the tax law provisions affecting tax-exempt organizations. My freetaxes com Unless otherwise noted, most of the changes became effective on August 17, 2006. My freetaxes com For key provisions, go to The Pension Protection Act of 2006. My freetaxes com Section 501(c)(3) organizations must make their Form 990-T, Exempt Organization Business Tax Return (and proxy tax under section 6033(e)), open for public inspection for a period of 3 years from the date the Form 990-T is required to be filed (determined with regard to any extension of time for filing) or is actually filed, whichever is later. My freetaxes com There is an increase in excise taxes relating to public charities, social welfare organizations, and private foundations. My freetaxes com There are additional standards for credit counseling organizations. My freetaxes com The definition of convention or association of churches has been modified. My freetaxes com Entities that are not required to file Form 990 or 990-EZ must file new Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ. My freetaxes com The requirements of disclosure to state officials relating to exempt organizations has been modified. My freetaxes com There are excise taxes imposed on excess benefit transactions involving donor advised funds and sponsoring organizations. My freetaxes com There are new excise taxes on prohibited tax shelter transactions. My freetaxes com There is a modification of recordkeeping requirements for certain charitable contributions. My freetaxes com Introduction This publication discusses the rules and procedures for organizations that seek recognition of exemption from federal income tax under section 501(a) of the Internal Revenue Code (the Code). My freetaxes com It explains the procedures you must follow to obtain an appropriate ruling or determination letter recognizing your organization's exemption, as well as certain other information that applies generally to all exempt organizations. My freetaxes com To qualify for exemption under the Code, your organization must be organized for one or more of the purposes specifically designated in the Code. My freetaxes com Organizations that are exempt under section 501(a) include those organizations described in section 501(c). My freetaxes com Section 501(c) organizations are covered in this publication. My freetaxes com Chapter 1, Application, Approval, and Appeal Procedures, provides general information about the procedures for obtaining recognition of tax-exempt status. My freetaxes com Chapter 2, Filing Requirements and Required Disclosures, contains information about annual filing requirements and other matters that may affect your organization's tax-exempt status. My freetaxes com Chapter 3, Section 501(c)(3) Organizations, contains detailed information on various matters affecting section 501(c)(3) organizations, including a section on the determination of private foundation status. My freetaxes com Chapter 4, Other Section 501(c) Organizations, includes separate sections for specific types of organizations described in section 501(c). My freetaxes com Chapter 5, Excise Taxes, provides information on when excise taxes may be imposed. My freetaxes com Organizations not discussed in this publication. My freetaxes com   Certain organizations that may qualify for exemption are not discussed in this publication, although they are included in the Organization Reference Chart. My freetaxes com These organizations (and the Code sections that apply to them) are as follows. My freetaxes com Corporations organized under Acts of Congress 501(c)(1) Teachers' retirement fund associations 501(c)(11) Mutual insurance companies 501(c)(15) Corporations organized to finance crop operations 501(c)(16) Employee funded pension trusts (created before June 25, 1959) 501(c)(18) Withdrawal liability payment fund 501(c)(22) Veterans' organizations (created before 1880) 501(c)(23) National Railroad Retirement Investment Trust 501(c)(28) Religious and apostolic associations 501(d) Cooperative hospital service organizations 501(e) Cooperative service organizations of operating educational organizations 501(f)   Section 501(c)(24) organizations (section 4049 ERISA trusts) are neither discussed in the text nor listed in the Organization Reference Chart. My freetaxes com   Similarly, farmers' cooperative associations that qualify for exemption under section 521, qualified state tuition programs described in section 529, and pension, profit-sharing, and stock bonus plans described in section 401(a) are not discussed in this publication. My freetaxes com If you think your organization falls within one of these categories, contact the IRS for any additional information you need. My freetaxes com For telephone assistance, call 1-877-829-5500. My freetaxes com   Check the Table of Contents at the beginning of this publication to determine whether your organization is described in this publication. My freetaxes com If it is, read the chapter (or section) that applies to your type of organization for the specific information you must give when applying for recognition of exemption. My freetaxes com Organization Reference Chart. My freetaxes com   The Organization Reference Chart enables you to locate at a glance the section of the Code under which your organization might qualify for exemption. My freetaxes com It also shows the required application form and, if your organization meets the exemption requirements, the annual return to be filed (if any), and whether or not a contribution to your organization will be deductible by a donor. My freetaxes com It also describes each type of qualifying organization and the general nature of its activities. My freetaxes com   You may use the Organization Reference Chart to determine the Code section that you think applies to your organization. My freetaxes com Any correspondence with the IRS (in requesting forms or otherwise) will be expedited if you indicate in your correspondence the appropriate Code section. My freetaxes com Check the IRS website, IRS. My freetaxes com gov, for the latest updates, Tax Information for Charities & Other Non-Profits, www. My freetaxes com irs. My freetaxes com gov/charities/index. My freetaxes com html. My freetaxes com Comments and suggestions. My freetaxes com   We welcome your comments about this publication and your suggestions for future editions. My freetaxes com   You can e-mail us while visiting our website at IRS. My freetaxes com gov. My freetaxes com   You can send your comments to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. My freetaxes com NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. My freetaxes com Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. My freetaxes com   If you wish telephone assistance, please call 1-877-829-5500. My freetaxes com This toll-free telephone service is available Monday through Friday. My freetaxes com Prev  Up  Next   Home   More Online Publications
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Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples

Note: On Sept. 23, 2013 IRS issued Notice 2013-61 providing guidance for employers and employees to claim refunds or adjust overpayments of FICA taxes and employment taxes with respect to certain benefits and remunerations provided to same-sex spouses.

IR-2013-72, Aug. 29, 2013

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.

Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.

Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

How to File a Claim for Refund

Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return.

Taxpayers who wish to file a refund claim for gift or estate taxes should file Form 843, Claim for Refund and Request for Abatement. For information on filing an amended return, see Tax Topic 308, Amended Returns, available on IRS.gov, or the Instructions to Forms 1040X and 843. Information on where to file your amended returns is available in the instructions to the form.

Future Guidance

Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.

Other agencies may provide guidance on other federal programs that they administer that are affected by the Code. 

Revenue Ruling 2013-17, along with updated Frequently Asked Questions for same-sex couples and updated FAQs for registered domestic partners and individuals in civil unions, are available today on IRS.gov. See also Publication 555, Community Property.

Treasury and the IRS will begin applying the terms of Revenue Ruling 2013-17 on Sept. 16, 2013, but taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so, as long as the statute of limitations for the earlier period has not expired.

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