With Bench, you have a team of experts running that distance for you. How Bench can helpįiling taxes may be the finish line, but bookkeeping is the marathon that gets you there. Before electing one of the optional methods, make sure to talk to a tax professional. Also, it may increase certain tax credits like the earned income credit or child and dependent care credit. You can use this section to elect what the IRS calls one of the “ optional methods,” which might give you credit toward your social security coverage even if your income from self-employment was very small (less than $6,367) or a loss. Part II: "Optional methods to figure net earnings" You can claim the resulting amount on yet another schedule of Form 1040- Schedule 1. Line 13 will prompt you to multiply whatever your self-employment tax is by 50%. Line 12 combines the amounts found in Line 10 and Line 11 for the total self-employment tax amount. Line 11 calculates how much Medicare tax you owe. Lines 9-10 calculates how much Social Security tax you owe. You can find this information on the Form W-2s your employer provided you. Lines 8a-d are where you’ll record any earnings from a job you already paid Social Security tax on (like wages or salary). This will be used for calculations in Lines 9-10. Line 7 states the maximum amount you can pay Social Security tax on, $142,800. Take the final amount recorded in line 4c and enter it in line 6 (unless you also have income as a church employee and received a Form W-2). Lines 2-4c will ask you to take your total net self-employment income and multiply it by 92.35% to calculate your “net earnings,” which is the part of your income that is subject to self-employment tax. Lines 1a and b are special lines about farming income that you don’t have to worry about unless you’re a farmer. Part II contains two optional methods that you must meet certain criteria to use. Most self-employed individuals will only fill out Part I. In years past, Schedule SE had a long and short version but this is no longer the case.
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