Form 1040 SE, Self-Employment Tax, is a form that you may have to fill out if you're self-employed or run your own business. Self-employment tax covers the amount that you would have to pay in social security and medicare taxes that are withdrawn from each paycheck if you worked for another person's company. It's helpful to understand the process of filling out this form before you start working on your return.
Navigate the flow chart on page one of Schedule SE before you proceed. This flow chart helps you determine if you need to fill out the long form or if you can fill out the quicker, shorter form at the bottom of the page. For instance, if you received wages for another job while being self-employed, you may have to fill out the long form.
Enter all income sources from your business activities -- profits and losses -- on the lines designated. That includes profit or loss carried over from Schedule C, Profit or Loss from Business Activities; Schedule F, Net Farm Profit; and Schedule K-1, Farm Partnerships. Add up the sources to determine the total income from your self-employment activities.
Calculate your net earnings from self-employment by multiplying the total income by 0.9235. If the total comes to an amount under $400, you do not have to file this form unless you are a church employee. Otherwise, enter the result on the designated line.
Multiply the net earnings figure by 0.153 to determine the self-employment tax due. If your net earnings exceed a certain level -- $106,800 as of tax year 2009 -- you must multiply it by 0.029 instead, then add an additional figure -- $13,243.20 as of tax year 2009 -- to determine the self-employment tax.
Navigate the additional questions if you're required to fill out the long form for Schedule SE on page two. Fill out Part II, Optional Methods To Figure Net Earnings. Carry the result to Part I where designated to calculate your total net earnings.
Add your church employee income to the worksheet if applicable, and multiply that figure by 0.9235 to get your net earnings for that activity. Complete the rest of the form that applies to your case -- including social security wages and tips -- to determine your total self-employment tax.
Tips & Warnings
- The multipliers, such as 0.9235 to find out net earnings and 0.153 to determine the tax, may vary by tax year.
- This information does not replace the advice of a certified tax professional. Read the Schedule SE instruction manual in completion before completing the form.
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How to Prepare Tax Schedule SE
If you were self employed and made more than $400 or employed by a church and made more than $108.20 then you...