Schedule SE (Self Employment)

We're almost done! When I started this series, it didn't occur to me that it was going to be this long. There are a lot of steps, and I'll be honest with you - tax prep software really cuts a lot of steps out. I use H&R Block online software. It really does walk you right through it, but it's good to know where their numbers are coming from.

My usual disclaimer: I'm not a tax accountant. Double check the instructions for yourself or consult your tax attorney.

The Schedule SE calculates the amount of self employment tax you owe. Here are the instructions.

This form is pretty easy. We are basically plugging in numbers from other forms and performing mathematical operations. That's it.

First, we need to decide if we should use the short form or the long form. I can tell you right now, we're going to be using the short form, but look over this chart to see why:

Now, let's look at the schedule itself:

Line 1a - net farm profit or loss from Schedule F. If you've got farm income, you should have filled out a Schedule F. If so, enter the number from Schedule F, line 34 here. (Sorry - you're on your own filling that form out. I know NOTHING about farm taxes.)

Line 1b - This is also related to farms.

Line 2 - net profit or loss from Schedule C. This is us. Look back at your Schedule C. I know we haven't finished it yet, but we've finished it far enough to be able to complete this form. The number on line 31 of the Schedule C will go on line 2 here.

Line 3 - Combine lines 1a, 1b, and 2. That's pretty easy.

Line 4 - Multiply line 3 by 92.35%. This is the amount of our Schedule C income that is actually subject to the self-employment tax. Basic math. The number on line 3 x .9235

Line 5 - Self-employment tax. This is the amount of self-employment tax we owe. If line 4 is less than $106,800, multiply it by 13.3% (.133). If line 4 is more than $106,800, multiply it by 2.9% (.029). Then, add $11,107.20 to the result. Enter your answer here and on your Form 1040 line 56.

The last line of the Schedule SE determines how much of your self employment tax is deductible. It is also basic math. If line 5 is $14,204.40 or less, multiply it by 57.51%. If it is more than $14,204.40, multiply it by 50% and add $1,067 to the result. Enter that number here and on Form 1040, line 27. This amount will come off your income to help determine your adjusted gross income.

That's it! All that's left is finishing up page 2 of the Schedule C, which is your inventory and your vehicle information.