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Self-Employment Tax

Wrong Treatment of Employees as Independent Contractors.  If a worker is in reality an employee, but receives a Form 1099-MISC from the business paying the compensation, the worker has two choices:
  1. Go along with the way the business classified the worker, file Schedule C and Schedule SE, and pay self-employment (SE) tax on the earnings, or
  2. File Form SS-8 - If this form is filed the IRS will then decide if the worker should have been treated as an employee, along with tax withholding and paying one-half of the employee's FICA.
To see examples of workers that are considered self employed click here.

Who Pays Self-Employment Tax? Taxpayers pay SE tax when earnings from self-employment are $400 or more.  A taxpayer is self-employed if he or she carries on a trade or business as a sole proprietor (including farmers) or as a general partner in a partnership.  A trade or business generally is an activity carried on for a livelihood or in good faith to make a profit. (read more)

Claiming all deductions.  Failing to claim all deductions related to self-employment violates the Self-Employment Contributions Act of 1954.  The act requires every taxpayer to claim all of his or her allowable deductions, including depreciation, in computing net earnings from self-employment for SE tax purposes.  Penalties apply for making a false statement or representation in connection with any matter arising under the act.

Self-Employment Tax Optional Methods.  There are optional methods designed to give taxpayers credit for Social Security coverage in years when the taxpayer otherwise has a loss or small amount of income from self-employment.  They may also be used to help taxpayers qualify for the earned income credit, the additional child tax credit, the child and dependent care credit, and the self-employed health insurance deduction. (read more)

To display instructions for entering Schedule SE in the tax program click here.

NOTE: This is a guide on entering Schedule SE into the TaxSlayer Pro program.  This is not intended as tax advice.  For additional information refer to the Additional Links below.

Additional links:
Minister / Clergy Member Tax Return
Instructions for Schedule SE (Form 1040), Self-Employment Tax
Instructions for Schedule C, Profit or Loss From Business
Instructions for Schedule F, Profit or Loss From Farming
Form 1099-MISC, Miscellaneous Income

Last Updated: 4/1/2015

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