Publication 334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ)

Publication 334

Previous Page | Table of Contents | Index | Next Page Right Arrow

taxmap/pubs/p334-003.htm#en_us_publink100025054

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.

If you earned income as a statutory employee, you do not pay SE tax on that income.

taxmap/pubs/p334-003.htm#en_us_publink100025056

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.

By not reporting all of your self-employment income, you could cause your social security benefits to be lower when you retire.

taxmap/pubs/p334-003.htm#en_us_publink100025058

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), discussed next.

taxmap/pubs/p334-003.htm#en_us_publink100025059

For 2012, you received one credit, up to a maximum of four credits, for each $1,130 ($1,160 for 2013) of income subject to social security taxes. Therefore, for 2012, if you had income (self-employment and wages) of $4,520 that was subject to social security taxes, you receive four credits ($4,520 ÷ $1,130).

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.

Making false statements to get or to increase social security benefits may subject you to penalties.

taxmap/pubs/p334-003.htm#en_us_publink100025061

Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. If you file your tax return or report a change in your self-employment income after this time limit, 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 income.

taxmap/pubs/p334-003.htm#en_us_publink100025062

You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.

Your net earnings from self-employment (excluding church employee income) were $400 or more.
You had church employee income of $108.28 or more.

The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits.

taxmap/pubs/p334-003.htm#en_us_publink100025064

For 2012, the SE tax rate on net earnings is 13.3% (10.4% social security tax plus 2.9% Medicare tax).

taxmap/pubs/p334-003.htm#en_us_publink100025065

Only the first $110,100 of your combined wages, tips, and net earnings in 2012 is subject to any combination of the 10.4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax.

All your combined wages, tips, and net earnings in 2012 are subject to any combination of the 2.9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax.

If wages and tips you receive as an employee are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $110,100, do not pay the 10.4% social security part of the SE tax on any of your net earnings. However, you must pay the 2.9% Medicare part of the SE tax on all your net earnings.

Deduct the employer-equivalent portion of your SE tax as an adjustment to income on line 27 of Form 1040.

taxmap/pubs/p334-003.htm#en_us_publink100025067

For information on methods of calculating SE tax, see Chapter 10, Self-Employment Tax.

taxmap/pubs/p334-003.htm#f11063p02

Table 1-2. Which Forms Must I File?

IF you are liable for:	THEN use Form:	DUE by:¹
Income tax	1040 and Schedule C or C-EZ²	15th day of 4th month after end of tax year.
Self-employment tax	Schedule SE	File with Form 1040.
Estimated tax	1040-ES	15th day of 4th, 6th, and 9th months of tax year, and 15th day of 1st month after the end of tax year.
Social security and Medicare taxes and income tax withholding	941 or 944	April 30, July 31, October 31, and January 31³.
		See Publication 15.
Providing information on social security and Medicare taxes and income tax withholding	W-2 (to employee) W-2 and W-3 (to the Social Security Administration)	January 31³. Last day of February (March 31 if filing electronically)³.
Federal unemployment (FUTA) tax	940	January 31³.
		April 30, July 31, October 31, and January 31, but only if the liability for unpaid tax is more than $500.
Filing information returns for payments to nonemployees and transactions with other persons	See Information Returns	Forms 1099 – to the recipient by January 31 and to the IRS by February 28 (March 31 if filing electronically).
		Other forms – see the General Instructions for Certain Information Returns.
Excise tax	See Excise Taxes	See the instructions to the forms.

¹ If a due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday. For more information, see Publication 509, Tax Calendars.

² File a separate schedule for each business.

³ See the form instructions if you go out of business, change the form of your business, or stop paying wages.

Previous Page | Table of Contents | Top of Page | Index | Next Page Right Arrow

Self-Employment (SE) Tax(p8)

Social security coverage.(p8)

The Social Security Administration (SSA) time limit for posting self-employment income.(p8)

Who must pay self-employment tax.(p8)

SE tax rate.(p9)

Maximum earnings subject to SE tax.(p9)

More information.(p9)