Table of Contents
- Who Must File Schedule SE
- Who Must Pay Self-Employment (SE) Tax
- Self-Employed Persons
- Employees of Churches and Church Organizations
- Ministers, Members of Religious Orders, and Christian Science Practitioners
- Members of Certain Religious Sects
- U.S. Citizens Employed by Foreign Governments or International Organizations
- U.S. Citizens or Resident Aliens Living Outside the United States
- Nonresident Alien
- Chapter 11 Bankruptcy Cases
- More Than One Business
- Joint Returns
- Community Income
- Qualified Joint Ventures
- Fiscal Year Filers
You must file Schedule SE if:
The amount on line 4 of Short Schedule SE or line 4c of Long Schedule SE is $400 or more, or
You had church employee income of $108.28 or more. See Employees of Churches and Church Organizations. However, see the Exception, next.
You must pay SE tax if you had net earnings of $400 or more as a self-employed person. If you are in business (farm or nonfarm) for yourself, you are self-employed.
You must also pay SE tax on your share of certain partnership income and your guaranteed payments. See Partnership Income or Loss, later.
If you had church employee income of $108.28 or more, you must pay SE tax. Church employee income is wages you received as an employee (other than as a minister, a member of a religious order, or a Christian Science practitioner) of a church or qualified church-controlled organization that has a certificate in effect electing an exemption from employer social security and Medicare taxes.
In most cases, you must pay SE tax on salaries and other income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner. But if you filed Form 4361 and received IRS approval, you will be exempt from paying SE tax on those net earnings. If you had no other income subject to SE tax, enter “Exempt—Form 4361” on Form 1040, line 57, or Form 1040NR, line 55. However, if you had other earnings of $400 or more subject to SE tax, see line A at the top of Long Schedule SE.
If you must pay SE tax, include this income on either Short or Long Schedule SE, line 2. But do not report it on Long Schedule SE, line 5a; it is not considered church employee income. Also, include on line 2:
The rental value of a home or an allowance for a home furnished to you (including payments for utilities), and
The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience.
However, do not include on line 2:
Retirement benefits you received from a church plan after retirement, or
The rental value of a home or an allowance for a home furnished to you (including payments for utilities) after retirement.
If you were a duly ordained minister who was an employee of a church and you must pay SE tax, the unreimbursed business expenses that you incurred as a church employee are allowed only as an itemized deduction for income tax purposes. However, when figuring SE tax, subtract on line 2 the allowable expenses from your self-employment earnings and attach an explanation.
If you were a U.S. citizen or resident alien serving outside the United States as a minister or member of a religious order and you must pay SE tax, you cannot reduce your net earnings by the foreign earned income exclusion or the foreign housing exclusion or deduction.
See Pub. 517 for details.
If you have conscientious objections to social security insurance because of your membership in and belief in the teachings of a religious sect recognized as being in existence at all times since December 31, 1950, and which has provided a reasonable level of living for its dependent members, you are exempt from SE tax if you received IRS approval by filing Form 4029. In this case, do not file Schedule SE. Instead, enter “Exempt—Form 4029” on Form 1040, line 57, or Form 1040NR, line 55. See Pub. 517 for details.
You must pay SE tax on income you earned as a U.S. citizen employed by a foreign government (or, in certain cases, by a wholly owned instrumentality of a foreign government or an international organization under the International Organizations Immunities Act) for services performed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the U.S. Virgin Islands. Report income from this employment on either Short or Long Schedule SE, line 2. If you performed services elsewhere as an employee of a foreign government or an international organization, those earnings are exempt from SE tax.
If you are a self-employed U.S. citizen or resident alien living outside the United States, in most cases you must pay SE tax. You cannot reduce your foreign earnings from self-employment by your foreign earned income exclusion.
If you are a self-employed nonresident alien living in the United States, you must pay SE tax if an international social security agreement in effect determines that you are covered under the U.S. social security system. See Exception under U.S. Citizens or Resident Aliens Living Outside the United States, earlier, for information about international social security agreements. If your self-employment income is subject to SE tax, complete Schedule SE and file it with your Form 1040NR.
While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment (for example, from Schedule C or Schedule F) will not be included in your Form 1040 income. Instead, it will be included on the income tax return (Form 1041) of the bankruptcy estate. However, you (not the bankruptcy estate) are responsible for paying SE tax on your net earnings from self-employment.
Enter on the dotted line to the left of Schedule SE, line 3, “Chap. 11 bankruptcy income” and the amount of your net profit or (loss). Combine that amount with the total of lines 1a, 1b, and 2 (if any) and enter the result on line 3.
For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040.
If you had two or more businesses subject to self-employment tax, your net earnings from self-employment are the combined net earnings from all of your businesses. If you had a loss in one business, it reduces the income from another. Figure the combined SE tax on one Schedule SE.
Show the name of the spouse with self-employment income on Schedule SE. If both spouses have self-employment income, each must file a separate Schedule SE. However, if one spouse qualifies to use Short Schedule SE (front of form) and the other must use Long Schedule SE (back of form), both can use the same form. One spouse should complete the front and the other the back.
Include the total profits or losses from all businesses on Form 1040. Enter the combined SE tax on Form 1040, line 57.
If any of the income from a business (including farming) is community income, then the income and deductions are reported as follows.
If only one spouse participates in the business, all of the income from that business is the self-employment earnings of the spouse who carried on the business.
If both spouses participate, the income and deductions are allocated to the spouses based on their distributive shares.
If either or both spouses are partners in a partnership, see Partnership Income or Loss, later.
If both spouses elected to treat the business as a qualifying joint venture, see Qualified Joint Ventures, later.
If you are the only spouse who carried on the business, you must include on Schedule SE, line 3, the net profit or (loss) reported on the other spouse's Schedule C, C-EZ, or F (except in those cases described later under Income and Losses Not Included in Net Earnings From Self-Employment). Enter on the dotted line to the left of Schedule SE, line 3, “Community income taxed to spouse” and the amount of any net profit or (loss) allocated to your spouse as community income. Combine that amount with the total of lines 1a, 1b, and 2. Enter the result on line 3.
If you are not the spouse who carried on the business and you had no other income subject to SE tax, enter “Exempt community income” on Form 1040, line 57, or Form 1040NR, line 55. Do not file Schedule SE.
But if you have $400 or more of other earnings subject to SE tax, you must file Schedule SE. Include on Schedule SE, line 1a or 2, the net profit or (loss) from Schedule(s) C, C-EZ, or F allocated to you as community income. On the dotted line to the left of Schedule SE, line 3, enter “Exempt community income” and the allocated amount. Figure the amount to enter on line 3 as follows.
If the allocated amount is a net profit, subtract it from the total of lines 1a, 1b, and 2.
If the allocated amount is a loss, treat it as a positive amount and add it to the total of lines 1a, 1b, and 2.
If you and your spouse materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be taxed as a qualified joint venture instead of a partnership. For information on what it means to materially participate, see Material participation in the Instructions for Schedule C.
To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Each of you must file a separate Schedule C, C-EZ, or F. On each line of your separate Schedule C, C-EZ, or F, you must enter your share of the applicable income, deduction, or loss. Each of you also must file a separate Schedule SE to pay SE tax, as applicable.
For more information on qualified joint ventures, go to IRS.gov and enter “qualified joint venture” in the search box.
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