Small business tax help website
 

How to Report Self Employment Tax?

If a self employed business owner earns more than $400 in self employment earnings, then he or she needs to pay self employment tax. Self employment income needs to be reported a tax return even if it is less than $400 and the taxpayer does not need to pay taxes on them.

Reporting self employment tax on Schedule SE

While Schedule C is used to calculate net profit or loss from the self employment business, Schedule SE is used to report self employment tax. Schedule SE is then attached to the 1040 tax form.

There are two ways to report self employment tax on Schedule SE which is to be filed with your 1040 tax return form. The first way is to use the short Schedule SE (section A) and the other way is to use the long Schedule SE (section B). Like its name implies, the short Schedule SE has 6 lines whereas the long Schedule SE has 13 lines.

How to report self employment tax

To report self employment tax, the taxpayer has to import numbers from Schedule F, Schedule K-1, and Schedule C or C-EZ which are earnings from various forms of businesses.

All earnings are combined to give net earnings from self employment. The total self employment earnings is then multiplied by 92.35% to give taxable self employment earnings. If this number is less than $400, then the taxpayer does not owe any self employment tax and no Schedule SE for self employment tax reporting needs to be filed.

However, if the net earnings from self employment is more than $400, then the taxpayer needs to keep going with the Schedule SE to calculate the self employment tax obligation. Multiply the self employment earnings by the self employment tax rate of 15.3% if the self employment earnings is $97,500 or less. This number is then transferred to form 1040 as self employment tax.

If the self employment income is more than $97,500, then the taxpayer needs to multiply it by 2.9% instead of 15.3% and then add $12,090 to the result.