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2011 1040 Forms

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2011 1040 Forms

2011 1040 forms Publication 600 - Main Contents Table of Contents Actual Expenses Optional Sales Tax Tables Instructions for the State and Local General Sales Tax Deduction WorksheetWhat if you lived in more than one state? What if you lived in more than one locality? What if your local general sales tax rate changed during 2006? What if you lived in more than one locality in the same state during 2006? Actual Expenses Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2006 if the tax rate was the same as the general sales tax rate. 2011 1040 forms However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. 2011 1040 forms If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. 2011 1040 forms Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. 2011 1040 forms Also include any state and local general sales taxes paid for a leased motor vehicle. 2011 1040 forms Do not include sales taxes paid on items used in your trade or business. 2011 1040 forms To deduct your actual expenses, enter the amount on Schedule A, line 5, and enter “ST” on the dotted line to the left of the line 5 entry space. 2011 1040 forms You must keep your actual receipts showing general sales taxes paid to use this method. 2011 1040 forms Refund of general sales taxes. 2011 1040 forms   If you received a refund of state or local general sales taxes in 2006 for amounts paid in 2006, reduce your actual 2006 state and local general sales taxes by this amount. 2011 1040 forms If you received a refund of state or local general sales taxes in 2006 for prior year purchases, do not reduce your 2006 state and local general sales taxes by this amount. 2011 1040 forms But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. 2011 1040 forms See Recoveries in Pub. 2011 1040 forms 525 for details. 2011 1040 forms Optional Sales Tax Tables Instead of using your actual expenses, you can use the tables on pages 5 through 7 to figure your state and local general sales tax deduction. 2011 1040 forms You may also be able to add the state and local general sales taxes paid on certain specified items. 2011 1040 forms To figure your state and local general sales tax deduction using the tables, complete the worksheet below. 2011 1040 forms If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction. 2011 1040 forms State and Local General Sales Tax Deduction Worksheet (See the instructions that begin on page 3. 2011 1040 forms ) Before you begin: See the instructions for line 1 on page 3 if: You lived in more than one state during 2006, or You had any nontaxable income in 2006. 2011 1040 forms   1. 2011 1040 forms Enter your state general sales taxes from the applicable table on page 5 or 6 (see page 3 of the instructions) 1. 2011 1040 forms $     Next. 2011 1040 forms If, for all of 2006, you lived only in Connecticut, the District of Columbia, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, or West Virginia, skip lines 2 through 5, enter -0- on line 6, and go to line 7. 2011 1040 forms Otherwise, go to line 2       2. 2011 1040 forms Did you live in Alaska, Arizona, Arkansas (Texarkana only), California (Los Angeles County only), Colorado, Georgia, Illinois, Louisiana, New York State, or North Carolina in 2006?         No. 2011 1040 forms Enter -0-                   Yes. 2011 1040 forms Enter your local general sales taxes from the applicable table on page 7 (see page 3 of the instructions)     2. 2011 1040 forms $       3. 2011 1040 forms Did your locality impose a local general sales tax in 2006? Residents of California, Nevada, and Texarkana, Arkansas, see page 3 of the instructions             No. 2011 1040 forms Skip lines 3 through 5, enter -0- on line 6, and go to line 7             Yes. 2011 1040 forms Enter your local general sales tax rate, but omit the percentage sign. 2011 1040 forms For example, if your local general sales tax rate was 2. 2011 1040 forms 5%, enter 2. 2011 1040 forms 5. 2011 1040 forms If your local general sales tax rate changed or you lived in more than one locality in the same state during 2006, see page 3 of the instructions. 2011 1040 forms (If you do not know your local general sales tax rate, contact your local government. 2011 1040 forms ) 3. 2011 1040 forms . 2011 1040 forms       4. 2011 1040 forms Did you enter -0- on line 2 above?             No. 2011 1040 forms Skip lines 4 and 5 and go to line 6             Yes. 2011 1040 forms Enter your state general sales tax rate (shown in the table heading for your state), but omit the percentage sign. 2011 1040 forms For example, if your state general sales tax rate is 6%, enter 6. 2011 1040 forms 0 4. 2011 1040 forms . 2011 1040 forms       5. 2011 1040 forms Divide line 3 by line 4. 2011 1040 forms Enter the result as a decimal (rounded to at least three places) 5. 2011 1040 forms . 2011 1040 forms       6. 2011 1040 forms Did you enter -0- on line 2 above?             No. 2011 1040 forms Multiply line 2 by line 3   6. 2011 1040 forms $     Yes. 2011 1040 forms Multiply line 1 by line 5. 2011 1040 forms If you lived in more than one locality in the same state during 2006, see page 4 of the instructions           7. 2011 1040 forms Enter your state and local general sales taxes paid on specified items, if any (see page 4 of the instructions) 7. 2011 1040 forms $   8. 2011 1040 forms Deduction for general sales taxes. 2011 1040 forms Add lines 1, 6, and 7. 2011 1040 forms Enter the result here and the total from all your state and local general sales tax deduction worksheets, if you completed more than one, on Schedule A, line 5. 2011 1040 forms Be sure to enter “ST” on the dotted line to the left of the entry space 8. 2011 1040 forms $     Instructions for the State and Local General Sales Tax Deduction Worksheet Line 1. 2011 1040 forms    If you lived in the same state for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional state sales tax table for your state on page 5 or 6. 2011 1040 forms Read down the “At least-But less than” columns for your state and find the line that includes your 2006 income. 2011 1040 forms If married filing separately, do not include your spouse's income. 2011 1040 forms Your 2006 income is the amount shown on your Form 1040, line 38, plus any nontaxable items, such as the following. 2011 1040 forms Tax-exempt interest. 2011 1040 forms Veterans' benefits. 2011 1040 forms Nontaxable combat pay. 2011 1040 forms Workers' compensation. 2011 1040 forms Nontaxable part of social security and railroad retirement benefits. 2011 1040 forms Nontaxable part of IRA, pension, or annuity distributions. 2011 1040 forms Do not include rollovers. 2011 1040 forms Public assistance payments. 2011 1040 forms The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. 2011 1040 forms Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. 2011 1040 forms What if you lived in more than one state?    If you lived in more than one state during 2006, look up the table amount for each state using the above rules. 2011 1040 forms If there is no table for your state, the table amount is considered to be zero. 2011 1040 forms Multiply the table amount for each state you lived in by a fraction. 2011 1040 forms The numerator of the fraction is the number of days you lived in the state during 2006 and the denominator is the total number of days in the year (365). 2011 1040 forms Enter the total of the prorated table amounts for each state on line 1. 2011 1040 forms However, if you also lived in a locality during 2006 that imposed a local general sales tax, do not enter the total on line 1. 2011 1040 forms Instead, complete a separate worksheet for each state you lived in and enter the prorated amount for that state on line 1. 2011 1040 forms Example. 2011 1040 forms You lived in State A from January 1 through August 31, 2006 (243 days), and in State B from September 1 through December 31, 2006 (122 days). 2011 1040 forms The table amount for State A is $500. 2011 1040 forms The table amount for State B is $400. 2011 1040 forms You would figure your state general sales tax as follows. 2011 1040 forms State A: $500 x 243/365 = $333   State B: $400 x 122/365 = 134   Total = $467   If none of the localities in which you lived during 2006 imposed a local general sales tax, enter $467 on line 1 of your worksheet. 2011 1040 forms Otherwise, complete a separate worksheet for State A and State B. 2011 1040 forms Enter $333 on line 1 of the State A worksheet and $134 on line 1 of the State B worksheet. 2011 1040 forms Line 2. 2011 1040 forms   If you checked the “No” box, enter -0- on line 2, and go to line 3. 2011 1040 forms If you checked the “Yes” box and lived in the same locality for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional local sales tax table for your locality on page 7. 2011 1040 forms Read down the “At least-But less than” columns for your locality and find the line that includes your 2006 income. 2011 1040 forms See the line 1 instructions on this page to figure your 2006 income. 2011 1040 forms The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. 2011 1040 forms Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. 2011 1040 forms What if you lived in more than one locality?   If you lived in more than one locality during 2006, look up the table amount for each locality using the above rules. 2011 1040 forms If there is no table for your locality, the table amount is considered to be zero. 2011 1040 forms Multiply the table amount for each locality you lived in by a fraction. 2011 1040 forms The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). 2011 1040 forms If you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality, enter the total of the prorated table amounts for each locality in that state on line 2. 2011 1040 forms Otherwise, complete a separate worksheet for lines 2 through 6 for each locality and enter each prorated table amount on line 2 of the applicable worksheet. 2011 1040 forms Example. 2011 1040 forms You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). 2011 1040 forms The table amount for Locality 1 is $100. 2011 1040 forms The table amount for Locality 2 is $150. 2011 1040 forms You would figure the amount to enter on line 2 as follows. 2011 1040 forms Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet. 2011 1040 forms Locality 1: $100 x 243/365 = $67   Locality 2: $150 x 122/365 = 50   Total = $117   Line 3. 2011 1040 forms   If you lived in California, check the “No” box if your combined state and local general sales tax rate is 7. 2011 1040 forms 25%. 2011 1040 forms Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 7. 2011 1040 forms 25%. 2011 1040 forms   If you lived in Nevada, check the “No” box if your combined state and local general sales tax rate is 6. 2011 1040 forms 5%. 2011 1040 forms Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 6. 2011 1040 forms 5%. 2011 1040 forms   If you lived in Texarkana, Arkansas, check the “Yes” box and enter “4. 2011 1040 forms 0” on line 3. 2011 1040 forms Your local general sales tax rate of 4. 2011 1040 forms 0% includes the additional 1. 2011 1040 forms 0% Arkansas state sales tax rate for Texarkana and the 1. 2011 1040 forms 5% sales tax rate for Miller County. 2011 1040 forms What if your local general sales tax rate changed during 2006?    If you checked the “Yes” box and your local general sales tax rate changed during 2006, figure the rate to enter on line 3 as follows. 2011 1040 forms Multiply each tax rate for the period it was in effect by a fraction. 2011 1040 forms The numerator of the fraction is the number of days the rate was in effect during 2006 and the denominator is the total number of days in the year (365). 2011 1040 forms Enter the total of the prorated tax rates on line 3. 2011 1040 forms Example. 2011 1040 forms Locality 1 imposed a 1% local general sales tax from January 1 through September 30, 2006 (273 days). 2011 1040 forms The rate increased to 1. 2011 1040 forms 75% for the period from October 1 through December 31, 2006 (92 days). 2011 1040 forms You would enter “1. 2011 1040 forms 189” on line 3, figured as follows. 2011 1040 forms January 1 - September 30: 1. 2011 1040 forms 00 x 273/365 = 0. 2011 1040 forms 748   October 1 - December 31: 1. 2011 1040 forms 75 x 92/365 = 0. 2011 1040 forms 441   Total = 1. 2011 1040 forms 189   What if you lived in more than one locality in the same state during 2006?    Complete a separate worksheet for lines 2 through 6 for each locality in your state if you lived in more than one locality in the same state during 2006 and either of the following applies. 2011 1040 forms Each locality did not have the same local general sales tax rate. 2011 1040 forms You lived in Texarkana, AR, or Los Angeles County, CA. 2011 1040 forms   To figure the amount to enter on line 3 of the worksheet for each locality in which you lived (except a locality for which you used the table on page 7 to figure your local general sales tax deduction), multiply the local general sales tax rate by a fraction. 2011 1040 forms The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). 2011 1040 forms Example. 2011 1040 forms You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). 2011 1040 forms The local general sales tax rate for Locality 1 is 1%. 2011 1040 forms The rate for Locality 2 is 1. 2011 1040 forms 75%. 2011 1040 forms You would enter “0. 2011 1040 forms 666” on line 3 for the Locality 1 worksheet and “0. 2011 1040 forms 585” for the Locality 2 worksheet, figured as follows. 2011 1040 forms Locality 1: 1. 2011 1040 forms 00 x 243/365 = 0. 2011 1040 forms 666   Locality 2: 1. 2011 1040 forms 75 x 122/365 = 0. 2011 1040 forms 585   Line 6. 2011 1040 forms   If you lived in more than one locality in the same state during 2006, you should have completed line 1 only on the first worksheet for that state and separate worksheets for lines 2 through 6 for any other locality within that state in which you lived during 2006. 2011 1040 forms If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet. 2011 1040 forms Line 7. 2011 1040 forms    Enter on line 7 any state and local general sales taxes paid on the following specified items. 2011 1040 forms If you are completing more than one worksheet, include the total for line 7 on only one of the worksheets. 2011 1040 forms A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). 2011 1040 forms Also include any state and local general sales taxes paid for a leased motor vehicle. 2011 1040 forms If the state sales tax rate on these items is higher than the general sales tax rate, only include the amount of tax you would have paid at the general sales tax rate. 2011 1040 forms An aircraft or boat, if the tax rate was the same as the general sales tax rate. 2011 1040 forms A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies. 2011 1040 forms Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation. 2011 1040 forms You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly. 2011 1040 forms Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. 2011 1040 forms The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. 2011 1040 forms In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly. 2011 1040 forms   Do not include sales taxes paid on items used in your trade or business. 2011 1040 forms If you received a refund of state or local general sales taxes in 2006, see Refund of general sales taxes on page 1. 2011 1040 forms Prev  Up  Next   Home   More Online Publications
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The 2011 1040 Forms

2011 1040 forms 10. 2011 1040 forms   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. 2011 1040 forms Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. 2011 1040 forms Use Schedule SE to figure net earnings from self-employment. 2011 1040 forms Sole proprietor or independent contractor. 2011 1040 forms   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. 2011 1040 forms SE tax rate. 2011 1040 forms    For 2013, the SE tax rate on net earnings is 15. 2011 1040 forms 3% (12. 2011 1040 forms 4% social security tax plus 2. 2011 1040 forms 9% Medicare tax). 2011 1040 forms Maximum earnings subject to self-employment tax. 2011 1040 forms    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. 2011 1040 forms 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. 2011 1040 forms   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. 2011 1040 forms 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. 2011 1040 forms   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. 2011 1040 forms 4% social security part of the SE tax on any of your net earnings. 2011 1040 forms However, you must pay the 2. 2011 1040 forms 9% Medicare part of the SE tax on all your net earnings. 2011 1040 forms Special Rules and Exceptions Aliens. 2011 1040 forms   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. 2011 1040 forms S. 2011 1040 forms citizens. 2011 1040 forms Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. 2011 1040 forms S. 2011 1040 forms social security system. 2011 1040 forms 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 1040 forms S. 2011 1040 forms residents for self-employment tax purposes. 2011 1040 forms For more information on aliens, see Publication 519, U. 2011 1040 forms S. 2011 1040 forms Tax Guide for Aliens. 2011 1040 forms Child employed by parent. 2011 1040 forms   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. 2011 1040 forms Church employee. 2011 1040 forms    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. 2011 1040 forms 28 or more in wages from the church or organization. 2011 1040 forms For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2011 1040 forms Fishing crew member. 2011 1040 forms   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. 2011 1040 forms You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. 2011 1040 forms The pay is not more than $100 per trip. 2011 1040 forms The pay is received only if there is a minimum catch. 2011 1040 forms The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. 2011 1040 forms You get a share of the catch or a share of the proceeds from the sale of the catch. 2011 1040 forms Your share depends on the amount of the catch. 2011 1040 forms The boat's operating crew normally numbers fewer than 10 individuals. 2011 1040 forms (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. 2011 1040 forms ) Notary public. 2011 1040 forms   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). 2011 1040 forms State or local government employee. 2011 1040 forms   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. 2011 1040 forms Foreign government or international organization employee. 2011 1040 forms   You are subject to SE tax if both the following conditions are true. 2011 1040 forms You are a U. 2011 1040 forms S. 2011 1040 forms citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. 2011 1040 forms Your employer is not required to withhold social security and Medicare taxes from your wages. 2011 1040 forms U. 2011 1040 forms S. 2011 1040 forms citizen or resident alien residing abroad. 2011 1040 forms    If you are a self-employed U. 2011 1040 forms S. 2011 1040 forms citizen or resident alien living outside the United States, in most cases you must pay SE tax. 2011 1040 forms Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. 2011 1040 forms Exception. 2011 1040 forms    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. 2011 1040 forms Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. 2011 1040 forms The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. 2011 1040 forms   For more information, see the Instructions for Schedule SE (Form 1040). 2011 1040 forms More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. 2011 1040 forms A loss from one business reduces your profit from another business. 2011 1040 forms Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. 2011 1040 forms Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. 2011 1040 forms It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. 2011 1040 forms Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. 2011 1040 forms If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. 2011 1040 forms Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. 2011 1040 forms The regular method. 2011 1040 forms The nonfarm optional method. 2011 1040 forms The farm optional method. 2011 1040 forms You must use the regular method unless you are eligible to use one or both of the optional methods. 2011 1040 forms 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 1040 forms You want to receive credit for social security benefit coverage. 2011 1040 forms You incurred child or dependent care expenses for which you could claim a credit. 2011 1040 forms (An optional method may increase your earned income, which could increase your credit. 2011 1040 forms ) You are entitled to the earned income credit. 2011 1040 forms (An optional method may increase your earned income, which could increase your credit. 2011 1040 forms ) You are entitled to the additional child tax credit. 2011 1040 forms (An optional method may increase your earned income, which could increase your credit. 2011 1040 forms ) Effects of using an optional method. 2011 1040 forms   Using an optional method could increase your SE tax. 2011 1040 forms Paying more SE tax could result in your getting higher benefits when you retire. 2011 1040 forms   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 tax or no tax using the regular method. 2011 1040 forms   The optional methods may be used only to figure your SE tax. 2011 1040 forms To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. 2011 1040 forms Regular Method Multiply your total earnings subject to SE tax by 92. 2011 1040 forms 35% (. 2011 1040 forms 9235) to get your net earnings under the regular method. 2011 1040 forms See Short Schedule SE, line 4, or Long Schedule SE, line 4a. 2011 1040 forms Net earnings figured using the regular method are also called actual net earnings. 2011 1040 forms Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. 2011 1040 forms You may use this method if you meet all the following tests. 2011 1040 forms You are self-employed on a regular basis. 2011 1040 forms This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. 2011 1040 forms The net earnings can be from either farm or nonfarm earnings or both. 2011 1040 forms You have used this method less than 5 years. 2011 1040 forms (There is a 5-year lifetime limit. 2011 1040 forms ) The years do not have to be one after another. 2011 1040 forms Your net nonfarm profits were: Less than $5,024, and Less than 72. 2011 1040 forms 189% of your gross nonfarm income. 2011 1040 forms Net nonfarm profits. 2011 1040 forms   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). 2011 1040 forms   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 1040 forms Gross nonfarm income. 2011 1040 forms   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). 2011 1040 forms Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. 2011 1040 forms Table 10-1. 2011 1040 forms Figuring Nonfarm Net Earnings IF your gross nonfarm income is. 2011 1040 forms . 2011 1040 forms . 2011 1040 forms THEN your net earnings are equal to. 2011 1040 forms . 2011 1040 forms . 2011 1040 forms $6,960 or less Two-thirds of your gross nonfarm income. 2011 1040 forms More than $6,960 $4,640 Actual net earnings. 2011 1040 forms   Your actual net earnings are 92. 2011 1040 forms 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. 2011 1040 forms 35% (. 2011 1040 forms 9235) to get actual net earnings). 2011 1040 forms Actual net earnings are equivalent to net earnings figured using the regular method. 2011 1040 forms Optional net earnings less than actual net earnings. 2011 1040 forms   You cannot use this method to report an amount less than your actual net earnings from self-employment. 2011 1040 forms Gross nonfarm income of $6,960 or less. 2011 1040 forms   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. 2011 1040 forms Example 1. 2011 1040 forms Net nonfarm profit less than $5,024 and less than 72. 2011 1040 forms 189% of gross nonfarm income. 2011 1040 forms Ann Green runs a craft business. 2011 1040 forms Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. 2011 1040 forms She meets the test for being self-employed on a regular basis. 2011 1040 forms She has used the nonfarm optional method less than 5 years. 2011 1040 forms Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . 2011 1040 forms 9235). 2011 1040 forms Because her net profit is less than $5,024 and less than 72. 2011 1040 forms 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). 2011 1040 forms Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. 2011 1040 forms Example 2. 2011 1040 forms Net nonfarm profit less than $5,024 but not less than 72. 2011 1040 forms 189% of gross nonfarm income. 2011 1040 forms Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. 2011 1040 forms She must use the regular method to figure her net earnings. 2011 1040 forms She cannot use the nonfarm optional method because her net profit is not less than 72. 2011 1040 forms 189% of her gross income. 2011 1040 forms Example 3. 2011 1040 forms Net loss from a nonfarm business. 2011 1040 forms Assume that in Example 1 Ann has a net loss of $700. 2011 1040 forms She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. 2011 1040 forms Example 4. 2011 1040 forms Nonfarm net earnings less than $400. 2011 1040 forms Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. 2011 1040 forms In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. 2011 1040 forms Gross nonfarm income of more than $6,960. 2011 1040 forms   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. 2011 1040 forms Example 1. 2011 1040 forms Net nonfarm profit less than $5,024 and less than 72. 2011 1040 forms 189% of gross nonfarm income. 2011 1040 forms John White runs an appliance repair shop. 2011 1040 forms His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. 2011 1040 forms He meets the test for being self-employed on a regular basis. 2011 1040 forms He has used the nonfarm optional method less than 5 years. 2011 1040 forms His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . 2011 1040 forms 9235). 2011 1040 forms Because his net profit is less than $5,024 and less than 72. 2011 1040 forms 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. 2011 1040 forms Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. 2011 1040 forms Example 2. 2011 1040 forms Net nonfarm profit not less than $5,024. 2011 1040 forms Assume that in Example 1 John's net profit is $5,400. 2011 1040 forms He must use the regular method. 2011 1040 forms He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. 2011 1040 forms Example 3. 2011 1040 forms Net loss from a nonfarm business. 2011 1040 forms Assume that in Example 1 John has a net loss of $700. 2011 1040 forms He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. 2011 1040 forms Farm Optional Method Use the farm optional method only for earnings from a farming business. 2011 1040 forms See Publication 225 for information about this method. 2011 1040 forms Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. 2011 1040 forms To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. 2011 1040 forms Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. 2011 1040 forms Add the net earnings figured under each method to arrive at your total net earnings from self-employment. 2011 1040 forms You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. 2011 1040 forms If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. 2011 1040 forms Example. 2011 1040 forms You are a self-employed farmer. 2011 1040 forms You also operate a retail grocery store. 2011 1040 forms Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. 2011 1040 forms Table 10-2. 2011 1040 forms Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. 2011 1040 forms Method 1. 2011 1040 forms Using the regular method for both farm and nonfarm income. 2011 1040 forms Method 2. 2011 1040 forms Using the optional method for farm income and the regular method for nonfarm income. 2011 1040 forms Method 3. 2011 1040 forms Using the regular method for farm income and the optional method for nonfarm income. 2011 1040 forms Method 4. 2011 1040 forms Using the optional method for both farm and nonfarm income. 2011 1040 forms Note. 2011 1040 forms Actual net earnings is the same as net earnings figured using the regular method. 2011 1040 forms Table 10-3. 2011 1040 forms Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. 2011 1040 forms Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. 2011 1040 forms Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. 2011 1040 forms Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. 2011 1040 forms Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. 2011 1040 forms Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. 2011 1040 forms However, certain taxpayers must use Section B—Long Schedule SE. 2011 1040 forms 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 1040 forms Joint return. 2011 1040 forms   Even if you file a joint return, you cannot file a joint Schedule SE. 2011 1040 forms This is true whether one spouse or both spouses have earnings subject to SE tax. 2011 1040 forms If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. 2011 1040 forms 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 1040 forms Attach both schedules to the joint return. 2011 1040 forms More than one business. 2011 1040 forms   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. 2011 1040 forms A loss from one business will reduce your profit from another business. 2011 1040 forms File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. 2011 1040 forms Example. 2011 1040 forms You are the sole proprietor of two separate businesses. 2011 1040 forms You operate a restaurant that made a net profit of $25,000. 2011 1040 forms You also have a cabinetmaking business that had a net loss of $500. 2011 1040 forms You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. 2011 1040 forms You file Schedule SE showing total earnings subject to SE tax of $24,500. 2011 1040 forms Prev  Up  Next   Home   More Online Publications