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Schedule SE & 1040 Year-End Self-Employment Tax

Last Updated:
December 27, 2016

This article pertains to your year-end 1099 taxes and the forms you’ll need in order to calculate what you owe and file with the IRS in April. At the end of the year, you’ll need to fill out three forms: the Schedule C, the Schedule SE and the 1040.

What is self-employment tax and the Schedule SE?

When you’re a traditional W-2 employee, the company you work for will withhold a portion of your paycheck (7.5%) and also contribute to what’s called FICA tax (Federal Income Contributions Act). This portion of a traditional paycheck goes towards Social Security and Medicare. On the other hand, when you’re self-employed or earn contracting income, you need to do all the withholding yourself. You’ll pay 15.3% of what you earn in what’s known as SECA taxes (Self-Employment Contributions Act).

The Schedule SE is the form where you input your profit and losses to determine exactly how much you’ll pay in self-employment tax.

How to fill out the Schedule SE

Can you use the short Schedule SE?

The IRS has put together a flowchart to help you determine if you can fill out the shorter Schedule SE (the key questions involve whether you’ve earned more than $118,500, received unreported tips, etc.):

Schedule SE Flow Chart

After you determine whether you use the longer version or the shorter version, you combine all sources of 1099 income. 

Line-by-Line of the Short Schedule SE

1a - Net farm profit: This applies to farmers where they note their total profit or loss

1b - Social Security, Retirement, or Disability: Input here the amount you’ve received from any of these program.

2 - Net profit (or loss) from the Schedule C: This is where you’ll input the profit or losses from your Schedule C’s.

3 - Combine the lines above

4 - Multiply the line above (3) by 92.35% (.9235). If this amount is less than $400, then you do not need to pay any self-employment tax. Put the total amount after multiplying here.

5 - Self-employment tax. If the amount on line 4 is:

  • $118,500 or less, multiply line 4 by 15.3% (.153). Enter the result here and on Form 1040, line 57, or Form 1040NR, line 55
  • More than $118,500, multiply line 4 by 2.9% (.029). Then, add $14,694 to the result. Enter the total here and on Form 1040, line 57, or Form 1040NR, line 55

6. Deduction for one-half of self-employment tax. Multiply line 5 by 50% (.50). Enter the result here and on Form 1040, line 27, or Form 1040NR, line 27. This is where you can deduct one half of your self-employment tax amount from your taxable income that’s subject to income tax. This allowance makes sure you pay a lower amount on overall income tax because of the self-employment tax you pay.

Plugging Schedule SE Information into 1040

The amount you calculate on the Schedule SE you will then need to plug into the corresponding lines on the 1040 form.  

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