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taxmap/instr/i1040sse-001.htm#TXMP0dc6b313 General Instructions

taxmap/instr/i1040sse-001.htm#TXMP3727beb3 Who Must File Schedule SE

You must file Schedule SE if:

• Your net earnings from self-employment (see page SE-2) from other than church employee income were $400 or more, or
• You had church employee income of $108.28 or more—see below.

taxmap/instr/i1040sse-001.htm#TXMP1be9079a Who Must Pay Self-Employment (SE) Tax?

taxmap/instr/i1040sse-001.htm#TXMP53875487 Self-Employed Persons

You must pay SE tax if you had net earnings of $400 or more as a self-employed person. If you are in business for yourself or you are a farmer, 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 on page SE-2.

taxmap/instr/i1040sse-001.htm#TXMP24b6a791 Employees of Churches and Church Organizations

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 or member of a religious order) of a church or qualified church-controlled organization that has a certificate in effect electing an exemption from employer social security and Medicare taxes.

taxmap/instr/i1040sse-001.htm#TXMP7a0e324e Ministers and Members of Religious Orders

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 58. 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 have ever filed Form 2031 to elect social security coverage on your earnings as a minister, you cannot revoke that election.

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. Subtract the allowable amount from your SE earnings when figuring your SE tax.

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 housing exclusion or deduction.

See Pub. 517 for details.

taxmap/instr/i1040sse-001.htm#TXMP17bd0f1b Members of Certain Religious Sects

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 58. See Pub. 517 for details.

taxmap/instr/i1040sse-001.htm#TXMP4853e4a7 U.S. Citizens Employed by Foreign Governments or International Organizations

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.

taxmap/instr/i1040sse-001.htm#TXMP243604ac U.S. Citizens or Resident Aliens Living Outside the United States

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.

taxmap/instr/i1040sse-001.htm#TXMP51cbd1d2 Exception.

The United States has social security agreements with many countries to eliminate dual taxes under two social security systems. Under these agreements, you must generally pay social security and Medicare taxes to only the country you live in.

The United States now has social security agreements with the following countries: Australia, Austria, Belgium, Canada, Chile, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. Additional agreements are expected in the future. If you have questions about international social security agreements, you can:

1. Visit the Social Security Administration (SSA) website at www.socialsecurity.gov/international,
2. Call the SSA's Office of International Programs at:
   1. (410) 965-0144 for questions on benefits under agreements, or
   2. (410) 965-3549 for questions on the coverage rules of the agreements, or
3. Write to Social Security Administration, Office of International Programs, P.O. Box 17741, Baltimore, MD 21235-7741.

If your self-employment income is exempt from SE tax, you should get a statement from the appropriate agency of the foreign country verifying that your self-employment income is subject to social security coverage in that country. If the foreign country will not issue the statement, contact the SSA at the address shown above. Do not complete Schedule SE. Instead, attach a copy of the statement to Form 1040 and enter Exempt, see attached statement on Form 1040, line 58.

taxmap/instr/i1040sse-001.htm#TXMP6ebb4e35 Chapter 11 Bankruptcy Cases

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 self-employment 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 1 and 2 (if any) and enter the result on line 3.

For other reporting requirements, see page 18 in the instructions for Form 1040.

taxmap/instr/i1040sse-001.htm#TXMP6f3da34a More Than One Business

If you had two or more businesses, 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.

taxmap/instr/i1040sse-001.htm#TXMP76ba9e15 Joint Returns

Show the name of the spouse with SE income on Schedule SE. If both spouses have SE 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, as appropriate. Enter the combined SE tax on Form 1040, line 58.

taxmap/instr/i1040sse-001.htm#TXMP16b88699 Community Income

If any of the income from a business (including farming) is community income, then all of the income is considered SE earnings and the SE earnings must be reported based on the following.

• If only one spouse participates in the business, all of the income from that business is the SE earnings of the spouse who carried on the business.
• If you and your spouse are partners in a partnership, see on this page.
• If you and your spouse elected to treat the business as a qualifying joint venture, see on this page.

taxmap/instr/i1040sse-001.htm#TXMP08c5fe58 Married filing separately.

If you and your spouse had community income and file separate returns, attach Schedule SE to the return of the spouse with the SE income. Also, attach Schedule(s) C, C-EZ, or F to the return of each spouse.

If you are the 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 income not included in net earnings from self-employment as explained on page SE-3). 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 1 and 2 and 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 58; do not file Schedule SE. However, if you had other earnings subject to SE tax of $400 or more, enter on the dotted line to the left of Schedule SE, line 3, Exempt community income and the amount of net profit or (loss) from Schedule C, C-EZ, or F allocated to you as community income. If that amount is a net profit, subtract it from the total of lines 1 and 2, and enter the result on line 3. If that amount is a loss, treat it as a positive amount, add it to the total of lines 1 and 2, and enter the result on line 3.

Community income included on Schedule(s) C, C-EZ, or F must be divided for income tax purposes based on the community property laws of your state.

taxmap/instr/i1040sse-001.htm#TXMP469a5065 Qualified Joint Ventures

If you and your spouse materially participate (see Material participation in the 2007 Instructions for Schedule C) 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. To make this election, you must divide all items of income, gain, loss, deduction, and credit 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. You also must file a separate Schedule SE to pay SE tax on your share of the joint venture income.

taxmap/instr/i1040sse-001.htm#TXMP0196a944 Fiscal Year Filers

If your tax year is a fiscal year, use the tax rate and earnings base that apply at the time the fiscal year begins. Do not prorate the tax or earnings base for a fiscal year that overlaps the date of a rate or earnings base change.

Previous Page:  Instructions - 2007 Instructions for Schedule SE (Form 1040) Next Page:  Instructions - Specific Instructions Use   to find additional occurrences of topic items.