How to calculate net earnings subject to self-employment tax

The self-employment tax is calculated and reported on Schedule SE. Before completing this schedule you will need to determine your net earnings from self-employment.

• Sole proprietors and independent contractors determine their net earnings on Schedule C or C-EZ.
• Self-employed farmers use Schedule F.
• If you are self-employed as a member of a partnership, you should use information from your Schedule K-1 (Form 1065 or 1065-B) to determine your earnings subject to self-employment tax.
• Church employees use the information on their W-2 statement.

Then you report these earnings on Schedule SE to figure your self-employment tax. Schedule SE is filed with your federal income tax return. If you do not have to file a federal income tax, but need to report and pay your self-employment tax, you can use Form 1040-SS to report your earnings. If you are a resident of Puerto Rico, you can file Form 1040-PR instead of Form 1040-SS.

Most taxpayers can use the Short Schedule in Section A of Schedule SE. If any of the following apply, you will need to complete Long Schedule SE in Section B.

• In addition to earnings from self-employment you also had wages and tips subject to social security, and your total earnings (from wages, tips and self-employment) were more than the maximum amount of income subject to social security tax for the year.
• You received tips subject to social security or Medicare tax that you did not report to your employer.
• You are a chuch employee and received income of $108.28 or more, as reported on your W-2.
• You are a minister, member of a religious order, or Christian Science practitioner who received IRS approval not be be taxed on earnings from these sources, but you owe self-employment tax on other earnings.
• You are using one of the optional methods to figure your net earnings from self-employment.