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previous page Previous Page: Publication 225 - Farmer's Tax Guide - Reporting Gains and Losses
next page Next Page: Publication 225 - Farmer's Tax Guide - How To Pay Self-Employment Tax
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p225-049.htm#en_us_publink100077450

Chapter 12
Self-Employment Tax(p73)

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What's New for 2008(p73)


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taxmap/pubs/p225-049.htm#en_us_publink100077452

Tax rates and maximum net earnings.(p73)

The maximum net self-employment earnings subject to the social security part (12.4%) of the self-employment tax increased to $102,000 for 2008. There is no maximum limit on earnings subject to the Medicare part (2.9%).
taxmap/pubs/p225-049.htm#en_us_publink100077453

Conservation Reserve Program (CRP) payments.(p73)

For payments made after 2007, CRP payments are excluded from self-employment tax for individuals receiving social security benefits for retirement or disability. See the Instructions for Schedule SE (Form 1040).
taxmap/pubs/p225-049.htm#en_us_publink100077454

Optional methods to figure net earnings.(p73)

For tax years beginning after 2007, the amount of gross and net income from self-employment you may have when using the farm optional method or nonfarm optional method has increased. This allows electing taxpayers to secure up to four credits of social security benefits coverage. In future years, the thresholds will be indexed to maintain that level of coverage. See Methods for Figuring Net Earnings.

What's New for 2009(p73)


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taxmap/pubs/p225-049.htm#en_us_publink100077456

Maximum net earnings.(p73)

The maximum net self-employment earnings subject to the social security part of the self-employment tax increased to $106,800 for 2009. There is no maximum limit on earnings subject to the Medicare part.

taxmap/pubs/p225-049.htm#TXMP2b43155eIntroduction

Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.
You usually have to pay SE tax if you are self-employed. You are usually self-employed if you operate your own farm on land you either own or rent. You have to figure SE tax on Schedule SE (Form 1040).
Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. See chapter 13 for information on employment taxes.
taxmap/pubs/p225-049.htm#en_us_publink100077457

Self-employment tax rate.(p73)


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The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

taxmap/pubs/p225-049.htm#TXMP71b60adb

Useful items

You may want to see:


Publication
 541 Partnerships
Form (and Instructions)
 1040: U.S. Individual Income Tax Return
 Sch F (Form 1040): Profit or Loss From Farming
 Sch SE (Form 1040): Self-Employment Tax
 1065: U.S. Return of Partnership Income
 Sch K-1 (Form 1065): Partner's Share of Income, Deductions, Credits, etc.
See chapter 16 for information about getting publications and forms.
taxmap/pubs/p225-049.htm#en_us_publink100077458

Why Pay Self-Employment Tax?(p73)


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Social security benefits are available to self-employed persons just as they are to wage earners. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
taxmap/pubs/p225-049.htm#en_us_publink100077459

How to become insured under social security.(p73)


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You must be insured under the social security system before you begin receiving social security benefits. You are insured if you have the required number of credits (also called quarters of coverage).
taxmap/pubs/p225-049.htm#en_us_publink100077460

Earning credits in 2008.(p73)


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You can earn a maximum of four credits per year. For 2008, you earn one credit for each $1,050 of combined wages and self-employment earnings subject to social security tax. You need $4,200 ($1,050 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2008. It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters.
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.socialsecurity.gov.
EIC
Making false statements to get or to increase social security benefits may subject you to penalties.
taxmap/pubs/p225-049.htm#en_us_publink100077462

The Social Security Administration (SSA) time limit for posting self-employment earnings.(p74)


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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.
EIC
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. The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above.
previous pagePrevious Page: Publication 225 - Farmer's Tax Guide - Reporting Gains and Losses
next pageNext Page: Publication 225 - Farmer's Tax Guide - How To Pay Self-Employment Tax
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication