Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

File 2007 Tax Return

W2 Ez10 40 Ez FormTax AmmendmentDownload 2010 Tax Forms2009 Tax Forms DownloadDo You Need To File A Tax Return In 2014040ez1040ez 2012 Instructions1040nr Online Filing FreeCan You Amend A Tax ReturnHow Do You File An Amended Federal Tax Return1040ez Tax Form 2012Earned Income Tax CreditIrs 1040-ez 2014 InstructionsH R Block Tax PreparationHow To Fill Out Amended Tax FormFederal Amended Tax FormsE File Form 1040x1040 Ez FilingFiling Previous Years Taxes1040ez Fillable Form2010 Free Tax Software DownloadIrs Gov 1040x FormIrs Form 1040 2012How Do I Amend A Tax ReturnHow To File State Taxes Online For FreeFile My State Taxes For Free OnlineWww H&rblock ComFile My State Tax Return FreeFree H&r Block Taxes2012 Taxes FreeHow To File Taxes For 2011Free Tax FilingFree H&r BlockIrs Estimated Tax Forms 2011Irs Forms2005 Tax Return Online10ezFile 2006 Taxes FreeTax Forms 2009

File 2007 Tax Return

File 2007 tax return 9. File 2007 tax return   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. File 2007 tax return This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. File 2007 tax return The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. File 2007 tax return See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. File 2007 tax return However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. File 2007 tax return You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. File 2007 tax return Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. File 2007 tax return If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. File 2007 tax return Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. File 2007 tax return Qualified education expenses. File 2007 tax return   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. File 2007 tax return They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. File 2007 tax return   In addition, if the student is at least a half-time student, room and board are qualified education expenses. File 2007 tax return   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. File 2007 tax return The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. File 2007 tax return The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. File 2007 tax return You will need to contact the eligible educational institution for qualified room and board costs. File 2007 tax return Eligible educational institution. File 2007 tax return   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. File 2007 tax return S. File 2007 tax return Department of Education. File 2007 tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. File 2007 tax return The educational institution should be able to tell you if it is an eligible educational institution. File 2007 tax return   Certain educational institutions located outside the United States also participate in the U. File 2007 tax return S. File 2007 tax return Department of Education's Federal Student Aid (FSA) programs. File 2007 tax return Half-time student. File 2007 tax return   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. File 2007 tax return Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. File 2007 tax return You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. File 2007 tax return Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). File 2007 tax return If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. File 2007 tax return Example 1. File 2007 tax return In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. File 2007 tax return She paid $5,800 of qualified education expenses from the following sources. File 2007 tax return   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. File 2007 tax return   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. File 2007 tax return However, she must include the $500 taxable earnings in her gross income subject to income tax. File 2007 tax return Example 2. File 2007 tax return Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. File 2007 tax return This must be included in her income subject to income tax. File 2007 tax return The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. File 2007 tax return Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). File 2007 tax return She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. File 2007 tax return Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File 2007 tax return The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. File 2007 tax return If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). File 2007 tax return Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. File 2007 tax return See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. File 2007 tax return There are many other situations in which Form 5329 is required. File 2007 tax return If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. File 2007 tax return Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Get Your Electronic Filing PIN

Español

To e-file your 2013 tax return or other electronic forms, you must verify your identity with your Self-Select PIN or your Adjusted Gross Income from your 2012 tax return. If you don't have either of these, you can get an Electronic Filing PIN.

 

   

Determine your eligibility...

 

  • You filed a 2012 Form 1040, Form 1040A, Form 1040-EZ or Form 1040-SS (PR), and
  • Your return was processed by November 23, 2013.

 

 

Gather your information...

 

  • Social Security Number (SSN) or Individuals Tax Identification Number (TIN)
  • First and last name
  • Date of birth
  • Filing status, and 
  • Complete mailing address as it appeared on your 2012 tax return.
 

Get your Electronic Filing PIN!

 

 

 

Using Your Electronic Filing PIN

When you are ready to file your return, enter your Electronic Filing PIN in the "Electronic Filing PIN" field. The Electronic Filing PIN is a temporary PIN we use to verify your identity when you e-file. Keep a copy of your signed tax return for your records.

More information: check availability of our systems.

Page Last Reviewed or Updated: 11-Mar-2014

The File 2007 Tax Return

File 2007 tax return 10. File 2007 tax return   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. File 2007 tax return 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. File 2007 tax return Use Schedule SE to figure net earnings from self-employment. File 2007 tax return Sole proprietor or independent contractor. File 2007 tax return   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. File 2007 tax return SE tax rate. File 2007 tax return    For 2013, the SE tax rate on net earnings is 15. File 2007 tax return 3% (12. File 2007 tax return 4% social security tax plus 2. File 2007 tax return 9% Medicare tax). File 2007 tax return Maximum earnings subject to self-employment tax. File 2007 tax return    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. File 2007 tax return 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. File 2007 tax return   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. File 2007 tax return 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. File 2007 tax return   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. File 2007 tax return 4% social security part of the SE tax on any of your net earnings. File 2007 tax return However, you must pay the 2. File 2007 tax return 9% Medicare part of the SE tax on all your net earnings. File 2007 tax return Special Rules and Exceptions Aliens. File 2007 tax return   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. File 2007 tax return S. File 2007 tax return citizens. File 2007 tax return Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. File 2007 tax return S. File 2007 tax return social security system. File 2007 tax return 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. File 2007 tax return S. File 2007 tax return residents for self-employment tax purposes. File 2007 tax return For more information on aliens, see Publication 519, U. File 2007 tax return S. File 2007 tax return Tax Guide for Aliens. File 2007 tax return Child employed by parent. File 2007 tax return   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. File 2007 tax return Church employee. File 2007 tax return    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. File 2007 tax return 28 or more in wages from the church or organization. File 2007 tax return For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. File 2007 tax return Fishing crew member. File 2007 tax return   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. File 2007 tax return 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. File 2007 tax return The pay is not more than $100 per trip. File 2007 tax return The pay is received only if there is a minimum catch. File 2007 tax return The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. File 2007 tax return You get a share of the catch or a share of the proceeds from the sale of the catch. File 2007 tax return Your share depends on the amount of the catch. File 2007 tax return The boat's operating crew normally numbers fewer than 10 individuals. File 2007 tax return (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. File 2007 tax return ) Notary public. File 2007 tax return   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)). File 2007 tax return State or local government employee. File 2007 tax return   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. File 2007 tax return Foreign government or international organization employee. File 2007 tax return   You are subject to SE tax if both the following conditions are true. File 2007 tax return You are a U. File 2007 tax return S. File 2007 tax return 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. File 2007 tax return Your employer is not required to withhold social security and Medicare taxes from your wages. File 2007 tax return U. File 2007 tax return S. File 2007 tax return citizen or resident alien residing abroad. File 2007 tax return    If you are a self-employed U. File 2007 tax return S. File 2007 tax return citizen or resident alien living outside the United States, in most cases you must pay SE tax. File 2007 tax return Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. File 2007 tax return Exception. File 2007 tax return    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. File 2007 tax return Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. File 2007 tax return 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. File 2007 tax return   For more information, see the Instructions for Schedule SE (Form 1040). File 2007 tax return 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. File 2007 tax return A loss from one business reduces your profit from another business. File 2007 tax return 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. File 2007 tax return 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. File 2007 tax return It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. File 2007 tax return 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. File 2007 tax return 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. File 2007 tax return Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. File 2007 tax return The regular method. File 2007 tax return The nonfarm optional method. File 2007 tax return The farm optional method. File 2007 tax return You must use the regular method unless you are eligible to use one or both of the optional methods. File 2007 tax return 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. File 2007 tax return You want to receive credit for social security benefit coverage. File 2007 tax return You incurred child or dependent care expenses for which you could claim a credit. File 2007 tax return (An optional method may increase your earned income, which could increase your credit. File 2007 tax return ) You are entitled to the earned income credit. File 2007 tax return (An optional method may increase your earned income, which could increase your credit. File 2007 tax return ) You are entitled to the additional child tax credit. File 2007 tax return (An optional method may increase your earned income, which could increase your credit. File 2007 tax return ) Effects of using an optional method. File 2007 tax return   Using an optional method could increase your SE tax. File 2007 tax return Paying more SE tax could result in your getting higher benefits when you retire. File 2007 tax return   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. File 2007 tax return   The optional methods may be used only to figure your SE tax. File 2007 tax return To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. File 2007 tax return Regular Method Multiply your total earnings subject to SE tax by 92. File 2007 tax return 35% (. File 2007 tax return 9235) to get your net earnings under the regular method. File 2007 tax return See Short Schedule SE, line 4, or Long Schedule SE, line 4a. File 2007 tax return Net earnings figured using the regular method are also called actual net earnings. File 2007 tax return Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. File 2007 tax return You may use this method if you meet all the following tests. File 2007 tax return You are self-employed on a regular basis. File 2007 tax return 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. File 2007 tax return The net earnings can be from either farm or nonfarm earnings or both. File 2007 tax return You have used this method less than 5 years. File 2007 tax return (There is a 5-year lifetime limit. File 2007 tax return ) The years do not have to be one after another. File 2007 tax return Your net nonfarm profits were: Less than $5,024, and Less than 72. File 2007 tax return 189% of your gross nonfarm income. File 2007 tax return Net nonfarm profits. File 2007 tax return   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). File 2007 tax return   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. File 2007 tax return Gross nonfarm income. File 2007 tax return   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). File 2007 tax return 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. File 2007 tax return Table 10-1. File 2007 tax return Figuring Nonfarm Net Earnings IF your gross nonfarm income is. File 2007 tax return . File 2007 tax return . File 2007 tax return THEN your net earnings are equal to. File 2007 tax return . File 2007 tax return . File 2007 tax return $6,960 or less Two-thirds of your gross nonfarm income. File 2007 tax return More than $6,960 $4,640 Actual net earnings. File 2007 tax return   Your actual net earnings are 92. File 2007 tax return 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. File 2007 tax return 35% (. File 2007 tax return 9235) to get actual net earnings). File 2007 tax return Actual net earnings are equivalent to net earnings figured using the regular method. File 2007 tax return Optional net earnings less than actual net earnings. File 2007 tax return   You cannot use this method to report an amount less than your actual net earnings from self-employment. File 2007 tax return Gross nonfarm income of $6,960 or less. File 2007 tax return   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. File 2007 tax return Example 1. File 2007 tax return Net nonfarm profit less than $5,024 and less than 72. File 2007 tax return 189% of gross nonfarm income. File 2007 tax return Ann Green runs a craft business. File 2007 tax return Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. File 2007 tax return She meets the test for being self-employed on a regular basis. File 2007 tax return She has used the nonfarm optional method less than 5 years. File 2007 tax return 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 × . File 2007 tax return 9235). File 2007 tax return Because her net profit is less than $5,024 and less than 72. File 2007 tax return 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). File 2007 tax return Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. File 2007 tax return Example 2. File 2007 tax return Net nonfarm profit less than $5,024 but not less than 72. File 2007 tax return 189% of gross nonfarm income. File 2007 tax return Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. File 2007 tax return She must use the regular method to figure her net earnings. File 2007 tax return She cannot use the nonfarm optional method because her net profit is not less than 72. File 2007 tax return 189% of her gross income. File 2007 tax return Example 3. File 2007 tax return Net loss from a nonfarm business. File 2007 tax return Assume that in Example 1 Ann has a net loss of $700. File 2007 tax return She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. File 2007 tax return Example 4. File 2007 tax return Nonfarm net earnings less than $400. File 2007 tax return Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. File 2007 tax return 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. File 2007 tax return Gross nonfarm income of more than $6,960. File 2007 tax return   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. File 2007 tax return Example 1. File 2007 tax return Net nonfarm profit less than $5,024 and less than 72. File 2007 tax return 189% of gross nonfarm income. File 2007 tax return John White runs an appliance repair shop. File 2007 tax return His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. File 2007 tax return He meets the test for being self-employed on a regular basis. File 2007 tax return He has used the nonfarm optional method less than 5 years. File 2007 tax return 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 × . File 2007 tax return 9235). File 2007 tax return Because his net profit is less than $5,024 and less than 72. File 2007 tax return 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. File 2007 tax return Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. File 2007 tax return Example 2. File 2007 tax return Net nonfarm profit not less than $5,024. File 2007 tax return Assume that in Example 1 John's net profit is $5,400. File 2007 tax return He must use the regular method. File 2007 tax return He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. File 2007 tax return Example 3. File 2007 tax return Net loss from a nonfarm business. File 2007 tax return Assume that in Example 1 John has a net loss of $700. File 2007 tax return He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. File 2007 tax return Farm Optional Method Use the farm optional method only for earnings from a farming business. File 2007 tax return See Publication 225 for information about this method. File 2007 tax return 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. File 2007 tax return To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. File 2007 tax return Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. File 2007 tax return Add the net earnings figured under each method to arrive at your total net earnings from self-employment. File 2007 tax return You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. File 2007 tax return If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. File 2007 tax return Example. File 2007 tax return You are a self-employed farmer. File 2007 tax return You also operate a retail grocery store. File 2007 tax return 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. File 2007 tax return Table 10-2. File 2007 tax return 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. File 2007 tax return Method 1. File 2007 tax return Using the regular method for both farm and nonfarm income. File 2007 tax return Method 2. File 2007 tax return Using the optional method for farm income and the regular method for nonfarm income. File 2007 tax return Method 3. File 2007 tax return Using the regular method for farm income and the optional method for nonfarm income. File 2007 tax return Method 4. File 2007 tax return Using the optional method for both farm and nonfarm income. File 2007 tax return Note. File 2007 tax return Actual net earnings is the same as net earnings figured using the regular method. File 2007 tax return Table 10-3. File 2007 tax return 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. File 2007 tax return 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. File 2007 tax return 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. File 2007 tax return Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. File 2007 tax return Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. File 2007 tax return Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. File 2007 tax return However, certain taxpayers must use Section B—Long Schedule SE. File 2007 tax return 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. File 2007 tax return Joint return. File 2007 tax return   Even if you file a joint return, you cannot file a joint Schedule SE. File 2007 tax return This is true whether one spouse or both spouses have earnings subject to SE tax. File 2007 tax return If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. File 2007 tax return 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. File 2007 tax return Attach both schedules to the joint return. File 2007 tax return More than one business. File 2007 tax return   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. File 2007 tax return A loss from one business will reduce your profit from another business. File 2007 tax return File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. File 2007 tax return Example. File 2007 tax return You are the sole proprietor of two separate businesses. File 2007 tax return You operate a restaurant that made a net profit of $25,000. File 2007 tax return You also have a cabinetmaking business that had a net loss of $500. File 2007 tax return 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. File 2007 tax return You file Schedule SE showing total earnings subject to SE tax of $24,500. File 2007 tax return Prev  Up  Next   Home   More Online Publications