Figure 12-1. Can I Use the Optional Methods?

Summary: This contains two flowcharts. The first one is used to determine if the taxpayer can use the nonfarm optional method to figure net earnings from self-employment.

Start

START here to determine if you can use the nonfarm optional method.

Decision (1)

Are your net nonfarm profits less than $4,721?

Decision (2)

Are your net nonfarm profits less than 72.189% of your gross nonfarm income?

Decision (3)

Were your actual net earnings from self-employment $400 or more in at least 2 of the 3 tax years before this year?

Decision (4)

Have you previously used this method less than 5 years? (Note: There is a 5-year lifetime limit.)

Process (a)

You cannot use the nonfarm optional method.

Process (b)

You can use the nonfarm optional method. See Publication 334.
Footnote: If you use both optional methods, see Using Both Optional Methods for limit on the amount to report.

End

This is the end of the flowchart.
Summary: The second flowchart is used to determine if the taxpayer can use the farm optional method to figure net earnings from self-employment.

Start

START here to determine if you can use the farm optional method.

Decision (1)

Is your gross farm income $6,540 or less?

Decision (2)

Are your net farm profits less than $4,721?

Process (a)

You can use the farm optional method. (see footnote) See Table 12-1.
Footnote: If you use both optional methods, see Using Both Optional Methods for limit on the amount to report.

Process (b)

You cannot use the farm optional method.

End

This is the end of the flowchart.

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