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2011 Federal Tax Forms 1040

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2011 Federal Tax Forms 1040

2011 federal tax forms 1040 Internal Revenue Bulletin:  2013-12  March 18, 2013  Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2013-21 Table of Contents SECTION 1. 2011 federal tax forms 1040 PURPOSE SECTION 2. 2011 federal tax forms 1040 BACKGROUND SECTION 3. 2011 federal tax forms 1040 SCOPE SECTION 4. 2011 federal tax forms 1040 APPLICATION. 2011 federal tax forms 1040 01 Limitations on Depreciation Deductions for Certain Automobiles. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 02 Inclusions in Income of Lessees of Passenger Automobiles. 2011 federal tax forms 1040 SECTION 5. 2011 federal tax forms 1040 EFFECTIVE DATE SECTION 6. 2011 federal tax forms 1040 DRAFTING INFORMATION SECTION 1. 2011 federal tax forms 1040 PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2013, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2013, including a separate table of inclusion amounts for lessees of trucks and vans. 2011 federal tax forms 1040 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. 2011 federal tax forms 1040 SECTION 2. 2011 federal tax forms 1040 BACKGROUND . 2011 federal tax forms 1040 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. 2011 federal tax forms 1040 For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. 2011 federal tax forms 1040 The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. 2011 federal tax forms 1040 This change reflects the higher rate of price inflation for trucks and vans since 1988. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 02 Section 331(a) of the American Taxpayer Relief Act of 2012, Pub. 2011 federal tax forms 1040 L. 2011 federal tax forms 1040 No. 2011 federal tax forms 1040 112-240, 126 Stat. 2011 federal tax forms 1040 2313 (Jan. 2011 federal tax forms 1040 2, 2013) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2014, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2014. 2011 federal tax forms 1040 Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). 2011 federal tax forms 1040 Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. 2011 federal tax forms 1040 Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2012, that is round 3 extension property (as defined in § 168(k)(4)(J)(iv)). 2011 federal tax forms 1040 Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. 2011 federal tax forms 1040 This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer: (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2013 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. 2011 federal tax forms 1040 The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. 2011 federal tax forms 1040 Under § 1. 2011 federal tax forms 1040 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. 2011 federal tax forms 1040 One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 2011 federal tax forms 1040 Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. 2011 federal tax forms 1040 SECTION 3. 2011 federal tax forms 1040 SCOPE . 2011 federal tax forms 1040 01 The limitations on depreciation deductions in section 4. 2011 federal tax forms 1040 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2013, and continue to apply for each taxable year that the passenger automobile remains in service. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 02 The tables in section 4. 2011 federal tax forms 1040 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2013. 2011 federal tax forms 1040 Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. 2011 federal tax forms 1040 See Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2008-22, 2008-1 C. 2011 federal tax forms 1040 B. 2011 federal tax forms 1040 658, for passenger automobiles first leased during calendar year 2008; Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2009-24, 2009-17 I. 2011 federal tax forms 1040 R. 2011 federal tax forms 1040 B. 2011 federal tax forms 1040 885, for passenger automobiles first leased during calendar year 2009; Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2010-18, 2010-09 I. 2011 federal tax forms 1040 R. 2011 federal tax forms 1040 B. 2011 federal tax forms 1040 427, as amplified and modified by section 4. 2011 federal tax forms 1040 03 of Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2011-21, 2011-12 I. 2011 federal tax forms 1040 R. 2011 federal tax forms 1040 B. 2011 federal tax forms 1040 560, for passenger automobiles first leased during calendar year 2010; Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2011-21, for passenger automobiles first leased during calendar year 2011; and Rev. 2011 federal tax forms 1040 Proc. 2011 federal tax forms 1040 2012-23, 2012-14 I. 2011 federal tax forms 1040 R. 2011 federal tax forms 1040 B. 2011 federal tax forms 1040 712, for passenger automobiles first leased during calendar year 2012. 2011 federal tax forms 1040 SECTION 4. 2011 federal tax forms 1040 APPLICATION . 2011 federal tax forms 1040 01 Limitations on Depreciation Deductions for Certain Automobiles. 2011 federal tax forms 1040 (1) Amount of the inflation adjustment. 2011 federal tax forms 1040 (a) Passenger automobiles (other than trucks or vans). 2011 federal tax forms 1040 Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. 2011 federal tax forms 1040 Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. 2011 federal tax forms 1040 The new car component of the CPI was 115. 2011 federal tax forms 1040 2 for October 1987 and 143. 2011 federal tax forms 1040 787 for October 2012. 2011 federal tax forms 1040 The October 2012 index exceeded the October 1987 index by 28. 2011 federal tax forms 1040 587. 2011 federal tax forms 1040 Therefore, the automobile price inflation adjustment for 2013 for passenger automobiles (other than trucks and vans) is 24. 2011 federal tax forms 1040 8 percent (28. 2011 federal tax forms 1040 587/115. 2011 federal tax forms 1040 2 x 100%). 2011 federal tax forms 1040 The dollar limitations in § 280F(a) are multiplied by a factor of 0. 2011 federal tax forms 1040 248, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2013. 2011 federal tax forms 1040 This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2013. 2011 federal tax forms 1040 (b) Trucks and vans. 2011 federal tax forms 1040 To determine the dollar limitations for trucks and vans first placed in service during calendar year 2013, the Service uses the new truck component of the CPI instead of the new car component. 2011 federal tax forms 1040 The new truck component of the CPI was 112. 2011 federal tax forms 1040 4 for October 1987 and 149. 2011 federal tax forms 1040 386 for October 2012. 2011 federal tax forms 1040 The October 2012 index exceeded the October 1987 index by 36. 2011 federal tax forms 1040 986. 2011 federal tax forms 1040 Therefore, the automobile price inflation adjustment for 2013 for trucks and vans is 32. 2011 federal tax forms 1040 9 percent (36. 2011 federal tax forms 1040 986/112. 2011 federal tax forms 1040 4 x 100%). 2011 federal tax forms 1040 The dollar limitations in § 280F(a) are multiplied by a factor of 0. 2011 federal tax forms 1040 329, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. 2011 federal tax forms 1040 This adjustment applies to all trucks and vans that are first placed in service in calendar year 2013. 2011 federal tax forms 1040 (2) Amount of the limitation. 2011 federal tax forms 1040 Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2013. 2011 federal tax forms 1040 Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2013 for which the § 168(k) additional first year depreciation deduction applies. 2011 federal tax forms 1040 Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2013 for which the § 168(k) additional first year depreciation deduction does not apply. 2011 federal tax forms 1040 REV. 2011 federal tax forms 1040 PROC. 2011 federal tax forms 1040 2013-21 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 2011 federal tax forms 1040 PROC. 2011 federal tax forms 1040 2013-21 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,400 3rd Tax Year $3,250 Each Succeeding Year $1,975 REV. 2011 federal tax forms 1040 PROC. 2011 federal tax forms 1040 2013-21 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 2011 federal tax forms 1040 PROC. 2011 federal tax forms 1040 2013-21 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,400 3rd Tax Year $3,250 Each Succeeding Year $1,975 . 2011 federal tax forms 1040 02 Inclusions in Income of Lessees of Passenger Automobiles. 2011 federal tax forms 1040 A taxpayer must follow the procedures in § 1. 2011 federal tax forms 1040 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2013. 2011 federal tax forms 1040 In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. 2011 federal tax forms 1040 REV. 2011 federal tax forms 1040 PROC. 2011 federal tax forms 1040 2013-21 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 2 4 6 7 8 19,500 20,000 2 5 6 9 9 20,000 20,500 2 5 8 9 11 20,500 21,000 3 6 8 10 12 21,000 21,500 3 6 10 11 13 21,500 22,000 3 7 10 13 14 22,000 23,000 4 8 11 14 16 23,000 24,000 4 9 14 16 18 24,000 25,000 5 10 15 18 21 25,000 26,000 5 12 16 21 23 26,000 27,000 6 12 19 23 25 27,000 28,000 6 14 20 25 28 28,000 29,000 7 15 22 27 30 29,000 30,000 7 16 24 29 33 30,000 31,000 8 17 26 31 35 31,000 32,000 8 19 27 33 38 32,000 33,000 9 20 29 35 40 33,000 34,000 10 21 31 37 43 34,000 35,000 10 22 33 39 45 35,000 36,000 11 23 35 41 48 36,000 37,000 11 25 36 43 50 37,000 38,000 12 26 38 45 53 38,000 39,000 12 27 40 47 55 39,000 40,000 13 28 42 49 58 40,000 41,000 13 29 44 52 59 41,000 42,000 14 30 45 54 63 42,000 43,000 14 32 47 56 64 43,000 44,000 15 33 48 59 67 44,000 45,000 15 34 51 60 69 45,000 46,000 16 35 52 63 72 46,000 47,000 17 36 54 65 74 47,000 48,000 17 38 55 67 77 48,000 49,000 18 39 57 69 79 49,000 50,000 18 40 59 71 82 50,000 51,000 19 41 61 73 84 51,000 52,000 19 42 63 75 87 52,000 53,000 20 43 65 77 89 53,000 54,000 20 45 66 79 92 54,000 55,000 21 46 68 81 94 55,000 56,000 21 47 70 84 96 56,000 57,000 22 48 72 85 99 57,000 58,000 22 50 73 88 101 58,000 59,000 23 51 75 90 103 59,000 60,000 24 52 76 92 106 60,000 62,000 24 54 79 95 110 62,000 64,000 25 56 83 99 115 64,000 66,000 27 58 87 103 120 66,000 68,000 28 60 90 108 125 68,000 70,000 29 63 93 112 130 70,000 72,000 30 65 97 117 134 72,000 74,000 31 68 100 121 139 74,000 76,000 32 70 104 125 144 76,000 78,000 33 73 107 129 149 78,000 80,000 34 75 111 133 154 80,000 85,000 36 79 117 141 162 85,000 90,000 39 85 126 151 174 90,000 95,000 41 91 135 162 186 95,000 100,000 44 97 144 172 199 100,000 110,000 48 106 157 188 217 110,000 120,000 53 118 174 210 241 120,000 130,000 59 129 193 230 266 130,000 140,000 64 141 210 252 290 140,000 150,000 70 153 227 273 315 150,000 160,000 75 165 245 294 339 160,000 170,000 80 177 263 315 363 170,000 180,000 86 189 280 336 388 180,000 190,000 91 201 298 357 412 190,000 200,000 97 212 316 378 436 200,000 210,000 102 224 333 400 461 210,000 220,000 107 236 351 420 486 220,000 230,000 113 248 368 442 509 230,000 240,000 118 260 386 463 534 240,000 And up 124 272 403 484 558 REV. 2011 federal tax forms 1040 PROC. 2011 federal tax forms 1040 2013-21 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 1 3 4 5 6 19,500 20,000 2 3 5 6 7 20,000 20,500 2 4 6 7 8 20,500 21,000 2 5 7 8 9 21,000 21,500 2 5 8 9 11 21,500 22,000 3 6 8 10 12 22,000 23,000 3 7 10 11 14 23,000 24,000 4 8 11 14 16 24,000 25,000 4 9 14 16 18 25,000 26,000 5 10 15 18 21 26,000 27,000 5 12 17 20 23 27,000 28,000 6 13 18 23 25 28,000 29,000 6 14 20 25 28 29,000 30,000 7 15 22 27 30 30,000 31,000 7 16 24 29 33 31,000 32,000 8 17 26 31 35 32,000 33,000 8 19 27 33 38 33,000 34,000 9 20 29 35 41 34,000 35,000 10 21 31 37 43 35,000 36,000 10 22 33 39 46 36,000 37,000 11 23 35 41 48 37,000 38,000 11 25 36 43 51 38,000 39,000 12 26 38 45 53 39,000 40,000 12 27 40 48 55 40,000 41,000 13 28 42 49 58 41,000 42,000 13 29 44 52 60 42,000 43,000 14 30 46 54 62 43,000 44,000 14 32 47 56 65 44,000 45,000 15 33 48 59 67 45,000 46,000 15 34 51 60 70 46,000 47,000 16 35 52 63 72 47,000 48,000 17 36 54 65 74 48,000 49,000 17 38 55 67 77 49,000 50,000 18 39 57 69 79 50,000 51,000 18 40 59 71 82 51,000 52,000 19 41 61 73 84 52,000 53,000 19 42 63 75 87 53,000 54,000 20 43 65 77 89 54,000 55,000 20 45 66 80 91 55,000 56,000 21 46 68 81 94 56,000 57,000 21 47 70 84 96 57,000 58,000 22 48 72 86 98 58,000 59,000 22 50 73 88 101 59,000 60,000 23 51 75 90 103 60,000 62,000 24 52 78 93 108 62,000 64,000 25 55 81 97 113 64,000 66,000 26 57 85 101 118 66,000 68,000 27 60 88 106 122 68,000 70,000 28 62 92 110 127 70,000 72,000 29 64 96 114 132 72,000 74,000 30 67 99 118 137 74,000 76,000 31 69 103 122 142 76,000 78,000 32 72 105 127 147 78,000 80,000 34 73 110 131 151 80,000 85,000 35 78 116 138 160 85,000 90,000 38 84 124 149 172 90,000 95,000 41 90 133 160 184 95,000 100,000 44 95 142 171 196 100,000 110,000 48 104 156 186 214 110,000 120,000 53 116 173 207 240 120,000 130,000 58 128 191 228 264 130,000 140,000 64 140 208 249 288 140,000 150,000 69 152 226 270 313 150,000 160,000 75 164 243 292 336 160,000 170,000 80 176 261 312 361 170,000 180,000 85 188 278 334 386 180,000 190,000 91 199 296 355 410 190,000 200,000 96 211 314 376 434 200,000 210,000 101 223 332 397 459 210,000 220,000 107 235 349 418 483 220,000 230,000 112 247 367 439 507 230,000 240,000 118 259 384 460 532 240,000 And up 123 271 401 482 556 SECTION 5. 2011 federal tax forms 1040 EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2013. 2011 federal tax forms 1040 SECTION 6. 2011 federal tax forms 1040 DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. 2011 federal tax forms 1040 Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). 2011 federal tax forms 1040 For further information regarding this revenue procedure, contact Mr. 2011 federal tax forms 1040 Harvey at (202) 622-4930 (not a toll-free call). 2011 federal tax forms 1040 Prev  Up  Next   Home   More Internal Revenue Bulletins
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SOI Tax Stats - Controlled Foreign Corporations

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  • Data are taken from Form 5471 - Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
  • For U.S. income tax purposes, a foreign corporation is "controlled" if U.S. shareholders own more than 50% of its outstanding voting stock.
  • Data are also available for the One-Time Dividend Received Deduction reported on Form 8895.

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U.S. Corporations and Their Controlled Foreign Corporations
     Data Presented: Number, Assets, Receipts, Earnings, Taxes, Distributions, Subpart F Income, and Related Party Transactions
     Classified by: Selected NAICS Industrial Sector*
     Tax Years: 2008     2006     2004   
 
     Classified by: Selected Country of Incorporation
     Tax Years: 2008     2006     2004   
 
     Classified by: Selected Country of Incorporation and NAICS Industrial Sector*
     Tax Years: 2008     2006     2004   
 
U.S. Corporations with Total Assets of $500 Million or More and Their 7,500 Largest Controlled Foreign Corporations
     Data Presented: Number, Assets, Receipts, Earnings, Taxes, Distributions, and Subpart F Income
     Classified by: Selected NAICS Industrial Sector*
     Tax Years: 2002   2000   1998   1996   1994   1992   1988
 
     Classified by: Selected Country of Incorporation
     Tax Years: 2002   2000   1998   1996   1994   1992   1988
 
     Classified by: Selected Country of Incorporation and NAICS Industrial Sector*
     Tax Years: 2002   2000   1998   1996   1994   1988


 

U.S. Corporations with Total Assets of $500 Million or More and Their 7,500 Largest Controlled Foreign Corporations
     Data Presented: Number, Assets, Receipts, and Earnings, Standard Industrial Classification (SIC) and North American Industry Classification System (NAICS)
     Classified by: Selected NAICS Industrial Sector
     Tax Year: 1998


*Note:  For Tax Years prior to 1998, industry data are presented by Standard Industry Classification (SIC).  Industry data for Tax Years 1998 to present are presented by North American Industry Classification System (NAICS)


SOI Bulletin Articles

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Page Last Reviewed or Updated: 15-Jan-2014

The 2011 Federal Tax Forms 1040

2011 federal tax forms 1040 12. 2011 federal tax forms 1040   Self-Employment Tax Table of Contents What's New for 2013 What's New for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Why Pay Self-Employment Tax? How To Pay Self-Employment TaxReplacing a lost social security card. 2011 federal tax forms 1040 Name change. 2011 federal tax forms 1040 Penalty for underpayment of estimated tax. 2011 federal tax forms 1040 Who Must Pay Self-Employment Tax?Limited partner. 2011 federal tax forms 1040 Community property. 2011 federal tax forms 1040 Figuring Self-Employment EarningsLandlord Participation in Farming Methods for Figuring Net EarningsRegular Method Farm Optional Method Nonfarm Optional Method Using Both Optional Methods Reporting Self-Employment Tax What's New for 2013 Tax rates. 2011 federal tax forms 1040  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. 2011 federal tax forms 1040 4% to 12. 2011 federal tax forms 1040 4%. 2011 federal tax forms 1040 The Medicare part of the tax remains at 2. 2011 federal tax forms 1040 9%. 2011 federal tax forms 1040 As a result, the self-employment tax is increased from 13. 2011 federal tax forms 1040 3% to 15. 2011 federal tax forms 1040 3%. 2011 federal tax forms 1040 Additional Medicare Tax. 2011 federal tax forms 1040 . 2011 federal tax forms 1040  For tax years beginning in 2013, a 0. 2011 federal tax forms 1040 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. 2011 federal tax forms 1040 Use Form 8959, Additional Medicare Tax, to figure this tax. 2011 federal tax forms 1040 For more information, see the Instructions for Form 8959. 2011 federal tax forms 1040 Maximum net earnings. 2011 federal tax forms 1040  The maximum net self-employment earnings subject to the social security part (12. 2011 federal tax forms 1040 4%) of the self-employment tax increased to $113,700 for 2013. 2011 federal tax forms 1040 There is no maximum limit on earnings subject to the Medicare part (2. 2011 federal tax forms 1040 9%). 2011 federal tax forms 1040 What's New for 2014 Maximum net earnings. 2011 federal tax forms 1040  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. 2011 federal tax forms 1040 Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. 2011 federal tax forms 1040 It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. 2011 federal tax forms 1040 You usually have to pay SE tax if you are self-employed. 2011 federal tax forms 1040 You are usually self-employed if you operate your own farm on land you either own or rent. 2011 federal tax forms 1040 You have to figure SE tax on Schedule SE (Form 1040). 2011 federal tax forms 1040 Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. 2011 federal tax forms 1040 See chapter 13 for information on employment taxes. 2011 federal tax forms 1040 Self-employment tax rate. 2011 federal tax forms 1040   For tax years beginning in 2013, the self-employment tax rate is 15. 2011 federal tax forms 1040 3%. 2011 federal tax forms 1040 The rate consists of two parts: 12. 2011 federal tax forms 1040 4% for social security (old-age, survivors, and disability insurance) and 2. 2011 federal tax forms 1040 9% for Medicare (hospital insurance). 2011 federal tax forms 1040 Topics - This chapter discusses: Why pay self-employment tax How to pay self-employment tax Who must pay self-employment tax Figuring self-employment earnings Landlord participation in farming Methods for figuring net earnings Reporting self-employment tax Useful Items - You may want to see: Publication 541 Partnerships Form (and Instructions) 1040 U. 2011 federal tax forms 1040 S. 2011 federal tax forms 1040 Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. 2011 federal tax forms 1040 S. 2011 federal tax forms 1040 Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. 2011 federal tax forms 1040 See chapter 16 for information about getting publications and forms. 2011 federal tax forms 1040 Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. 2011 federal tax forms 1040 Your payments of SE tax contribute to your coverage under the social security system. 2011 federal tax forms 1040 Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. 2011 federal tax forms 1040 How to become insured under social security. 2011 federal tax forms 1040   You must be insured under the social security system before you begin receiving social security benefits. 2011 federal tax forms 1040 You are insured if you have the required number of credits (also called quarters of coverage). 2011 federal tax forms 1040 Earning credits in 2013. 2011 federal tax forms 1040   You can earn a maximum of four credits per year. 2011 federal tax forms 1040 For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. 2011 federal tax forms 1040 You need $4,640 ($1,160 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2013. 2011 federal tax forms 1040 It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. 2011 federal tax forms 1040 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. 2011 federal tax forms 1040 socialsecurity. 2011 federal tax forms 1040 gov. 2011 federal tax forms 1040 Making false statements to get or to increase social security benefits may subject you to penalties. 2011 federal tax forms 1040 The Social Security Administration (SSA) time limit for posting self-employment earnings. 2011 federal tax forms 1040   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. 2011 federal tax forms 1040    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. 2011 federal tax forms 1040 The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. 2011 federal tax forms 1040 How To Pay Self-Employment Tax To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN). 2011 federal tax forms 1040 This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. 2011 federal tax forms 1040 An ITIN does not entitle you to social security benefits. 2011 federal tax forms 1040 Obtaining an ITIN does not change your immigration or employment status under U. 2011 federal tax forms 1040 S. 2011 federal tax forms 1040 law. 2011 federal tax forms 1040 Obtaining a social security number. 2011 federal tax forms 1040   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. 2011 federal tax forms 1040 The application is also available in Spanish. 2011 federal tax forms 1040 You can get this form at any Social Security office or by calling 1-800-772-1213. 2011 federal tax forms 1040    You can also download Form SS-5 from the Social Security Administration website at  www. 2011 federal tax forms 1040 socialsecurity. 2011 federal tax forms 1040 gov. 2011 federal tax forms 1040   If you have a social security number from the time you were an employee, you must use that number. 2011 federal tax forms 1040 Do not apply for a new one. 2011 federal tax forms 1040 Replacing a lost social security card. 2011 federal tax forms 1040   If you have a number but lost your card, file Form SS-5. 2011 federal tax forms 1040 You will get a new card showing your original number, not a new number. 2011 federal tax forms 1040 Name change. 2011 federal tax forms 1040   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. 2011 federal tax forms 1040 Obtaining an individual taxpayer identification number. 2011 federal tax forms 1040   The IRS will issue you an ITIN, for tax use only, if you are a nonresident or resident alien and you do not have, and are not eligible to get, an SSN. 2011 federal tax forms 1040 To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. 2011 federal tax forms 1040 You can get this form by calling 1-800-829-3676. 2011 federal tax forms 1040 For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. 2011 federal tax forms 1040 Form W-7 and Publication 1915 are also available in Spanish. 2011 federal tax forms 1040    You can also download Form W-7 from the IRS website at IRS. 2011 federal tax forms 1040 gov. 2011 federal tax forms 1040 Paying estimated tax. 2011 federal tax forms 1040   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. 2011 federal tax forms 1040 You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. 2011 federal tax forms 1040 Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. 2011 federal tax forms 1040   However, if at least two-thirds of your gross income for 2013 or 2014 was from farming and you file your 2014 Form 1040 and pay all the tax due by March 2, 2015, you do not have to pay any estimated tax. 2011 federal tax forms 1040 For more information about estimated tax for farmers, see chapter 15. 2011 federal tax forms 1040 Penalty for underpayment of estimated tax. 2011 federal tax forms 1040   You may have to pay a penalty if you do not pay enough estimated tax by its due date. 2011 federal tax forms 1040 Who Must Pay Self-Employment Tax? You must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. 2011 federal tax forms 1040 The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. 2011 federal tax forms 1040 Aliens. 2011 federal tax forms 1040   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. 2011 federal tax forms 1040 S. 2011 federal tax forms 1040 citizens. 2011 federal tax forms 1040 Nonresident aliens are not subject to self-employment tax. 2011 federal tax forms 1040 However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. 2011 federal tax forms 1040 S. 2011 federal tax forms 1040 residents for self-employment tax purposes. 2011 federal tax forms 1040 For more information on aliens, see Publication 519, U. 2011 federal tax forms 1040 S. 2011 federal tax forms 1040 Tax Guide for Aliens. 2011 federal tax forms 1040 Are you self-employed?   You are self-employed if you carry on a trade or business (such as running a farm) as a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself. 2011 federal tax forms 1040 A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. 2011 federal tax forms 1040 Share farmer. 2011 federal tax forms 1040   You are a self-employed farmer under an income-sharing arrangement if both the following apply. 2011 federal tax forms 1040 You produce a crop or raise livestock on land belonging to another person. 2011 federal tax forms 1040 Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. 2011 federal tax forms 1040 Your net farm profit or loss from the income-sharing arrangement is reported on Schedule F (Form 1040) and included in your self-employment earnings. 2011 federal tax forms 1040   If you produce a crop or livestock on land belonging to another person and are to receive a specified rate of pay, a fixed sum of money, or a fixed quantity of the crop or livestock, and not a share of the crop or livestock or their proceeds, you may be either self-employed or an employee of the landowner. 2011 federal tax forms 1040 This will depend on whether the landowner has the right to direct or control your performance of services. 2011 federal tax forms 1040 Example. 2011 federal tax forms 1040 A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. 2011 federal tax forms 1040 Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. 2011 federal tax forms 1040 The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. 2011 federal tax forms 1040 The share farmer is provided a house in which to live. 2011 federal tax forms 1040 The landowner and the share farmer decide on a cropping plan. 2011 federal tax forms 1040 The share farmer is a self-employed farmer for purposes of the agreement to produce the crops, and the share farmer's part of the profit or loss from the crops is reported on Schedule F (Form 1040) and included in self-employment earnings. 2011 federal tax forms 1040 The tax treatment of the landowner is discussed later under Landlord Participation in Farming. 2011 federal tax forms 1040 Contract farming. 2011 federal tax forms 1040   Under typical contract farming arrangements, the grower receives a fixed payment per unit of crops or finished livestock delivered to the processor or packing company. 2011 federal tax forms 1040 Since the grower typically furnishes labor and bears some production risk, the payments are reported on Schedule F and are therefore subject to self-employment tax. 2011 federal tax forms 1040 4-H Club or FFA project. 2011 federal tax forms 1040   If an individual participates in a 4-H Club or Future Farmers of America (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. 2011 federal tax forms 1040 Report the net income as “Other income” on line 21 of Form 1040. 2011 federal tax forms 1040 If necessary, attach a statement showing the gross income and expenses. 2011 federal tax forms 1040 The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. 2011 federal tax forms 1040 Such a project is generally not considered a trade or business. 2011 federal tax forms 1040 Partners in a partnership. 2011 federal tax forms 1040   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. 2011 federal tax forms 1040 Limited partner. 2011 federal tax forms 1040   If you are a limited partner, your partnership income is generally not subject to SE tax. 2011 federal tax forms 1040 However, guaranteed payments you receive for services you perform for the partnership are subject to SE tax and should be reported to you in box 14 of your Schedule K-1 (Form 1065). 2011 federal tax forms 1040 Business Owned and Operated by Spouses. 2011 federal tax forms 1040   If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. 2011 federal tax forms 1040 You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. 2011 federal tax forms 1040 Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. 2011 federal tax forms 1040 Qualified joint venture. 2011 federal tax forms 1040   If you and your spouse each materially participate as the only members of a jointly owned and operated farm, and you file a joint tax return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. 2011 federal tax forms 1040 For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. 2011 federal tax forms 1040   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. 2011 federal tax forms 1040 Each of you must file a separate Schedule F and a separate Schedule SE. 2011 federal tax forms 1040 For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). 2011 federal tax forms 1040 Spouse employee. 2011 federal tax forms 1040   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. 2011 federal tax forms 1040 For more information about employment taxes, see chapter 13. 2011 federal tax forms 1040 Community property. 2011 federal tax forms 1040   If you are a partner and your distributive share of any income or loss from a trade or business carried on by the partnership is community property, treat your share as your self-employment earnings. 2011 federal tax forms 1040 Do not treat any of your share as self-employment earnings of your spouse. 2011 federal tax forms 1040 Figuring Self-Employment Earnings Farmer. 2011 federal tax forms 1040   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. 2011 federal tax forms 1040 Partnership income or loss. 2011 federal tax forms 1040   If you are a member of a partnership that carries on a trade or business, the partnership should report your self-employment earnings in box 14, code A, of your Schedule K-1 (Form 1065). 2011 federal tax forms 1040 Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). 2011 federal tax forms 1040 Use these amounts if you use the farm or nonfarm optional method to figure net earnings from self-employment (see Methods for Figuring Net Earnings , later). 2011 federal tax forms 1040   If you are a general partner, you may need to reduce these reported earnings by amounts you claim as a section 179 deduction, unreimbursed partnership expenses, or depletion on oil and gas properties. 2011 federal tax forms 1040   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. 2011 federal tax forms 1040   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). 2011 federal tax forms 1040   For general information on partnerships, see Publication 541. 2011 federal tax forms 1040 More than one business. 2011 federal tax forms 1040   If you have self-employment earnings from more than one trade, business, or profession, you generally must combine the net profit or loss from each to determine your total self-employment earnings. 2011 federal tax forms 1040 A loss from one business reduces your profit from another business. 2011 federal tax forms 1040 However, do not combine earnings from farm and nonfarm businesses if you are using one of the optional methods (discussed later) to figure net earnings. 2011 federal tax forms 1040 Community property. 2011 federal tax forms 1040   If any of the income from a farm or business, other than a partnership, is community property under state law, it is included in the self-employment earnings of the spouse carrying on the trade or business. 2011 federal tax forms 1040 Lost income payments. 2011 federal tax forms 1040   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. 2011 federal tax forms 1040 These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. 2011 federal tax forms 1040 Even if you are not farming when you receive the payment, it is included in self-employment earnings if it relates to your farm business (even though it is temporarily inactive). 2011 federal tax forms 1040 A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. 2011 federal tax forms 1040 Gain or loss. 2011 federal tax forms 1040   A gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers is not included in self-employment earnings. 2011 federal tax forms 1040 It does not matter whether the disposition is a sale, exchange, or involuntary conversion. 2011 federal tax forms 1040 For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. 2011 federal tax forms 1040 Investment property. 2011 federal tax forms 1040 Depreciable property or other fixed assets used in your trade or business. 2011 federal tax forms 1040 Livestock held for draft, breeding, sport, or dairy purposes, and not held primarily for sale, regardless of how long the livestock was held, or whether it was raised or purchased. 2011 federal tax forms 1040 Unharvested standing crops sold with land held more than 1 year. 2011 federal tax forms 1040 Timber, coal, or iron ore held for more than 1 year if an economic interest was retained, such as a right to receive coal royalties. 2011 federal tax forms 1040   A gain or loss from the cutting of timber is not included in self-employment earnings if the cutting is treated as a sale or exchange. 2011 federal tax forms 1040 For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. 2011 federal tax forms 1040 Wages and salaries. 2011 federal tax forms 1040   Wages and salaries received for services performed as an employee and covered by social security or railroad retirement are not included in self-employment earnings. 2011 federal tax forms 1040   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. 2011 federal tax forms 1040 Retired partner. 2011 federal tax forms 1040   Retirement income received by a partner from his or her partnership under a written plan is not included in self-employment earnings if all the following apply. 2011 federal tax forms 1040 The retired partner performs no services for the partnership during the year. 2011 federal tax forms 1040 The retired partner is owed only the retirement payments. 2011 federal tax forms 1040 The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. 2011 federal tax forms 1040 The payments to the retired partner are lifelong periodic payments. 2011 federal tax forms 1040 Conservation Reserve Program (CRP) payments. 2011 federal tax forms 1040   Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a longterm contract with the USDA, agreeing to convert to a less intensive use of that cropland. 2011 federal tax forms 1040 You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. 2011 federal tax forms 1040 Cost share payments you receive may qualify for the costsharing exclusion. 2011 federal tax forms 1040 See Cost-Sharing Exclusion (Improvements), above. 2011 federal tax forms 1040 CRP payments are reported to you on Form 1099G. 2011 federal tax forms 1040 Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. 2011 federal tax forms 1040 See the instructions for Schedule SE (Form 1040). 2011 federal tax forms 1040 Self-employed health insurance deduction. 2011 federal tax forms 1040   You cannot deduct the self-employed health insurance deduction you report on Form 1040, line 29, from self-employment earnings on Schedule SE (Form 1040). 2011 federal tax forms 1040 Landlord Participation in Farming As a general rule, income and deductions from rentals and from personal property leased with real estate are not included in determining self-employment earnings. 2011 federal tax forms 1040 However, income and deductions from farm rentals, including government commodity program payments received by a landowner who rents land, are included if the rental arrangement provides that the landowner will, and does, materially participate in the production or management of production of the farm products on the land. 2011 federal tax forms 1040 Crop shares. 2011 federal tax forms 1040   Rent paid in the form of crop shares is included in self-employment earnings for the year you sell, exchange, give away, or use the crop shares if you meet one of the four material participation tests (discussed next) at the time the crop shares are produced. 2011 federal tax forms 1040 Feeding such crop shares to livestock is considered using them. 2011 federal tax forms 1040 Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. 2011 federal tax forms 1040 Material participation for landlords. 2011 federal tax forms 1040   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. 2011 federal tax forms 1040 You do at least three of the following. 2011 federal tax forms 1040 Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. 2011 federal tax forms 1040 Furnish at least half the tools, equipment, and livestock used in the production activities. 2011 federal tax forms 1040 Advise or consult with your tenant. 2011 federal tax forms 1040 Inspect the production activities periodically. 2011 federal tax forms 1040 You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. 2011 federal tax forms 1040 You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. 2011 federal tax forms 1040 You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. 2011 federal tax forms 1040 These tests may be used as general guides for determining whether you are a material participant. 2011 federal tax forms 1040 Example. 2011 federal tax forms 1040 Drew Houston agrees to produce a crop on J. 2011 federal tax forms 1040 Clarke's cotton farm, with each receiving half the proceeds. 2011 federal tax forms 1040 Clarke advises Houston when to plant, spray, and pick the cotton. 2011 federal tax forms 1040 During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. 2011 federal tax forms 1040 Houston furnishes all labor needed to grow and harvest the crop. 2011 federal tax forms 1040 The management decisions made by Clarke in connection with the care of the cotton crop and his regular inspection of the crop establish that he participates to a material degree in the cotton production operations. 2011 federal tax forms 1040 The income Clarke receives from his cotton farm is included in his self-employment earnings. 2011 federal tax forms 1040 Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. 2011 federal tax forms 1040 The regular method. 2011 federal tax forms 1040 The farm optional method. 2011 federal tax forms 1040 The nonfarm optional method. 2011 federal tax forms 1040 You must use the regular method unless you are eligible to use one or both of the optional methods. 2011 federal tax forms 1040 See Figure 12-1 , shown later. 2011 federal tax forms 1040 Figure 12-1. 2011 federal tax forms 1040 Can I Use the Optional Methods? Please click here for the text description of the image. 2011 federal tax forms 1040 Figure 12–1. 2011 federal tax forms 1040 Can I Use the Optional Methods? Why use an optional method?   You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. 2011 federal tax forms 1040 You want to receive credit for social security benefit coverage. 2011 federal tax forms 1040 You incurred child or dependent care expenses for which you could claim a credit. 2011 federal tax forms 1040 (An optional method may increase your earned income, which could increase your credit. 2011 federal tax forms 1040 ) You are entitled to the earned income credit. 2011 federal tax forms 1040 (An optional method may increase your earned income, which could increase your credit. 2011 federal tax forms 1040 ) You are entitled to the additional child tax credit. 2011 federal tax forms 1040 (An optional method may increase your earned income, which could increase your credit. 2011 federal tax forms 1040 ) Effects of using an optional method. 2011 federal tax forms 1040   Using an optional method could increase your SE tax. 2011 federal tax forms 1040 Paying more SE tax may result in you getting higher social security disability or retirement benefits. 2011 federal tax forms 1040   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller SE tax or no SE tax using the regular method. 2011 federal tax forms 1040   The optional methods may be used only to figure your SE tax. 2011 federal tax forms 1040 To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. 2011 federal tax forms 1040 Regular Method Multiply your total self-employment earnings by 92. 2011 federal tax forms 1040 35% (. 2011 federal tax forms 1040 9235) to get your net earnings under the regular method. 2011 federal tax forms 1040 See Short Schedule SE, line 4, or Long Schedule SE, line 4a. 2011 federal tax forms 1040 Net earnings figured using the regular method are also called “actual net earnings. 2011 federal tax forms 1040 ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. 2011 federal tax forms 1040 You can use this method if you meet either of the following tests. 2011 federal tax forms 1040 Your gross farm income is $6,960 or less. 2011 federal tax forms 1040 Your net farm profits are less than $5,024. 2011 federal tax forms 1040 Gross farm income. 2011 federal tax forms 1040   Your gross farm income is the total of the amounts from: Schedule F (Form 1040), line 9, and Schedule K-1 (Form 1065), box 14, code B (from farm partnerships). 2011 federal tax forms 1040 Net farm profits. 2011 federal tax forms 1040   Net farm profits generally are the total of the amounts from: Schedule F (Form 1040), line 34, and Schedule K-1 (Form 1065), box 14, code A (from farm partnerships). 2011 federal tax forms 1040 However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. 2011 federal tax forms 1040 For more information, see Partnership income or loss , earlier. 2011 federal tax forms 1040 Figuring farm net earnings. 2011 federal tax forms 1040   If you meet either of the two tests explained above, use Table 12-1. 2011 federal tax forms 1040 Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. 2011 federal tax forms 1040 Table 12-1. 2011 federal tax forms 1040 Figuring Farm Net Earnings IF your gross farm income  is. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 . 2011 federal tax forms 1040 THEN your net earnings are equal to. 2011 federal tax forms 1040 . 2011 federal tax forms 1040 . 2011 federal tax forms 1040 $6,960 or less Two-thirds of your gross farm income. 2011 federal tax forms 1040 More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. 2011 federal tax forms 1040   If your gross farm income is $6,960 or less and your farm net earnings figured under the farm optional method are less than your actual net earnings, you can use the farm optional method to reduce or eliminate your SE tax. 2011 federal tax forms 1040 Your actual net earnings are your net earnings figured using the regular method, explained earlier. 2011 federal tax forms 1040 Example. 2011 federal tax forms 1040 Your gross farm income is $540 and your net farm profit is $460. 2011 federal tax forms 1040 Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. 2011 federal tax forms 1040 35% of $460). 2011 federal tax forms 1040 You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. 2011 federal tax forms 1040 Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. 2011 federal tax forms 1040 If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. 2011 federal tax forms 1040 You can use this method even if you do not use the farm optional method for determining your farm net earnings and even if you have a net loss from your nonfarm business. 2011 federal tax forms 1040 For more information about the nonfarm optional method, see Publication 334. 2011 federal tax forms 1040 You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. 2011 federal tax forms 1040 Using Both Optional Methods If you use both optional methods, you must add the net earnings figured under each method to arrive at your total net earnings from self-employment. 2011 federal tax forms 1040 You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. 2011 federal tax forms 1040 If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. 2011 federal tax forms 1040 Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. 2011 federal tax forms 1040 Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. 2011 federal tax forms 1040 Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. 2011 federal tax forms 1040 However, certain taxpayers must use Section B–Long Schedule SE. 2011 federal tax forms 1040 Use the chart on page 1 of Schedule SE to find out which one to use. 2011 federal tax forms 1040 If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. 2011 federal tax forms 1040 Deduction for employer-equivalent portion of self-employment tax. 2011 federal tax forms 1040   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. 2011 federal tax forms 1040 This deduction only affects your income tax. 2011 federal tax forms 1040 It does not affect either your net earnings from self-employment or your SE tax. 2011 federal tax forms 1040   To deduct the tax, enter on Form 1040, line 27, the amount shown on Section A, Line 6, or Section B, line 13, Deduction for employer-equivalent portion of self-employment tax, of the Schedule SE. 2011 federal tax forms 1040 Joint return. 2011 federal tax forms 1040   Even if you file a joint return, you cannot file a joint Schedule SE. 2011 federal tax forms 1040 This is true whether one spouse or both spouses have self-employment earnings. 2011 federal tax forms 1040 Your spouse is not considered self-employed just because you are. 2011 federal tax forms 1040 If both of you have self-employment earnings, each of you must complete a separate Schedule SE. 2011 federal tax forms 1040 However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. 2011 federal tax forms 1040 Attach both schedules to the joint return. 2011 federal tax forms 1040 If you and your spouse operate a business as a partnership, see Business Owned and Operated by Spouses and Qualified joint venture , earlier, under Who Must Pay Self-Employment Tax . 2011 federal tax forms 1040 Prev  Up  Next   Home   More Online Publications