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Freetaxusa 2009 3. Freetaxusa 2009 Self-Employment Tax Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Must Pay Self-Employment Tax?Employed by a U. Freetaxusa 2009 S. Freetaxusa 2009 Church Effect of Exclusion Members of the Clergy Income From U. Freetaxusa 2009 S. Freetaxusa 2009 Possessions Exemption From Social Security and Medicare Taxes Topics - This chapter discusses: Who must pay self-employment tax, and Who is exempt from self-employment tax. Freetaxusa 2009 Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 517 Social Security and Other Information for Members of the Clergy and Religious Workers Form (and Instructions) Form 1040-PR Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia Form 1040-SS U. Freetaxusa 2009 S. Freetaxusa 2009 Self-Employment Tax Return Form 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners Schedule SE (Form 1040) Self-Employment Tax See chapter 7 for information about getting these publications and forms. Freetaxusa 2009 Who Must Pay Self-Employment Tax? If you are a self-employed U. Freetaxusa 2009 S. Freetaxusa 2009 citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad. Freetaxusa 2009 The self-employment tax is a social security and Medicare tax on net earnings from self- employment. Freetaxusa 2009 You must pay self-employment tax if your net earnings from self-employment are at least $400. Freetaxusa 2009 For 2013, the maximum amount of net earnings from self-employment that is subject to the social security portion of the tax is $113,700. Freetaxusa 2009 All net earnings are subject to the Medicare portion of the tax. Freetaxusa 2009 Employed by a U. Freetaxusa 2009 S. Freetaxusa 2009 Church If you were employed by a U. Freetaxusa 2009 S. Freetaxusa 2009 church or a qualified church-controlled organization that chose exemption from social security and Medicare taxes and you received wages of $108. Freetaxusa 2009 28 or more from the organization, the amounts paid to you are subject to self-employment tax. Freetaxusa 2009 However, you can choose to be exempt from social security and Medicare taxes if you are a member of a recognized religious sect. Freetaxusa 2009 See Publication 517 for more information about church employees and self-employment tax. Freetaxusa 2009 Effect of Exclusion You must take all of your self-employment income into account in figuring your net earnings from self-employment, even income that is exempt from income tax because of the foreign earned income exclusion. Freetaxusa 2009 Example. Freetaxusa 2009 You are in business abroad as a consultant and qualify for the foreign earned income exclusion. Freetaxusa 2009 Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. Freetaxusa 2009 You must pay self-employment tax on all of your net profit, including the amount you can exclude from income. Freetaxusa 2009 Members of the Clergy If you are a member of the clergy, you are treated as self-employed for self-employment tax purposes. Freetaxusa 2009 Your U. Freetaxusa 2009 S. Freetaxusa 2009 self-employment tax is based upon net earnings from self-employment figured without regard to the foreign earned income exclusion or the foreign housing exclusion. Freetaxusa 2009 You can receive exemption from coverage for your ministerial duties if you conscientiously oppose public insurance due to religious reasons or if you oppose it due to the religious principles of your denomination. Freetaxusa 2009 You must file Form 4361 to apply for this exemption. Freetaxusa 2009 This subject is discussed in further detail in Publication 517. Freetaxusa 2009 Income From U. Freetaxusa 2009 S. Freetaxusa 2009 Possessions If you are a U. Freetaxusa 2009 S. Freetaxusa 2009 citizen or resident alien and you own and operate a business in Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, or the U. Freetaxusa 2009 S. Freetaxusa 2009 Virgin Islands, you must pay tax on your net earnings from self-employment (if they are $400 or more) from those sources. Freetaxusa 2009 You must pay the self-employment tax whether or not the income is exempt from U. Freetaxusa 2009 S. Freetaxusa 2009 income taxes (or whether or not you otherwise must file a U. Freetaxusa 2009 S. Freetaxusa 2009 income tax return). Freetaxusa 2009 Unless your situation is described below, attach Schedule SE (Form 1040) to your U. Freetaxusa 2009 S. Freetaxusa 2009 income tax return. Freetaxusa 2009 If you do not have to file Form 1040 with the United States and you are a resident of any of the U. Freetaxusa 2009 S. Freetaxusa 2009 possessions listed in the preceding paragraph, figure your self-employment tax on Form 1040-SS. Freetaxusa 2009 Residents of Puerto Rico may file the Spanish-language Formulario 1040-PR. Freetaxusa 2009 If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 If you are enclosing a check or money order, file your return with the: Department of the Treasury P. Freetaxusa 2009 O. Freetaxusa 2009 Box 1303 Charlotte, NC 28201-1303 Exemption From Social Security and Medicare Taxes The United States may reach agreements with foreign countries to eliminate dual coverage and dual contributions (taxes) to social security systems for the same work. Freetaxusa 2009 See Bilateral Social Security (Totalization) Agreements in chapter 2 under Social Security and Medicare Taxes. Freetaxusa 2009 As a general rule, self-employed persons who are subject to dual taxation will only be covered by the social security system of the country where they reside. Freetaxusa 2009 For more information on how any specific agreement affects self-employed persons, contact the United States Social Security Administration, as discussed under Bilateral Social Security (Totalization) Agreements in chapter 2. Freetaxusa 2009 If your self-employment earnings should be exempt from foreign social security tax and subject only to U. Freetaxusa 2009 S. Freetaxusa 2009 self-employment tax, you should request a certificate of coverage from the U. Freetaxusa 2009 S. Freetaxusa 2009 Social Security Administration, Office of International Programs. Freetaxusa 2009 The certificate will establish your exemption from the foreign social security tax. Freetaxusa 2009 Send the request to the: Social Security Administration Office of International Programs P. Freetaxusa 2009 O. Freetaxusa 2009 Box 17741 Baltimore, MD 21235-7741 Prev Up Next Home More Online Publications
Understanding Your CP163 Notice
You received this notice to remind you of the amount you owe in tax, penalty and interest.
What you need to do
- Read your notice carefully ― it will explain how much money you owe on your taxes.
You may want to...
- Download copies of the following materials (if they weren't included with your notice):
- Call 1-800-829-FORM to have forms and publications mailed to you.
- Complete and send us a Form 2848, Power of Attorney and Declaration of Representative to authorize someone (such as an accountant) to contact us on your behalf.
- Make payment arrangements if you cannot pay the full amount you owe.
- Learn more about your payment options here.
Answers to Common Questions
Am I charged interest on the money I owe?
Yes, interest accrues on your unpaid balance until you pay it in full.
Do I receive a penalty if I cannot pay the full amount?
Yes, you receive a late payment penalty.
What happens if I cannot pay the full amount I owe?
You can arrange to make a payment plan with us if you cannot pay the full amount you owe.
How can I set up a payment plan?
Call the toll-free number listed on the top right corner of your notice to discuss payment options or learn more about payment arrangements here.
Tips for next year
Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions for which you may qualify. In many cases, you can file free. Learn more about how to file electronically here.
Page Last Reviewed or Updated: 26-Mar-2014
Printable samples of this notice (PDF)
Tax publications you may find useful
How to get help
- Call the 1-800 number listed on the top right corner of your notice.
- Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
- See if you qualify for help from a Low Income Taxpayer Clinic.
The Freetaxusa 2009
Freetaxusa 2009 29. Freetaxusa 2009 Limit on Itemized Deductions Table of Contents Introduction Useful Items - You may want to see: Are You Subject to the Limit? Which Itemized Deductions Are Limited? Which Itemized Deductions Are Not Limited? How Do You Figure the Limit?Example. Freetaxusa 2009 Introduction This chapter discusses the overall limit on itemized deductions on Schedule A (Form 1040). Freetaxusa 2009 The following topics are included. Freetaxusa 2009 Who is subject to the limit. Freetaxusa 2009 Which itemized deductions are limited. Freetaxusa 2009 How to figure the limit. Freetaxusa 2009 Useful Items - You may want to see: Forms (and Instructions) Schedule A (Form 1040) Itemized Deductions Are You Subject to the Limit? You are subject to the limit on certain itemized deductions if your adjusted gross income (AGI) is more than $300,000 if married filing jointly or qualifying widow(er), $275,000 if head of household, $250,000 if single, or $150,000 if married filing separately. Freetaxusa 2009 Your AGI is the amount on Form 1040, line 38. Freetaxusa 2009 Which Itemized Deductions Are Limited? The following Schedule A (Form 1040) deductions are subject to the overall limit on itemized deductions. Freetaxusa 2009 Taxes paid—line 9 Interest paid—lines 10, 11, 12, and 13 Gifts to charity—line 19 Job expenses and certain miscellaneous deductions—line 27 Other miscellaneous deductions—line 28, excluding gambling and casualty or theft losses. Freetaxusa 2009 . Freetaxusa 2009 Which Itemized Deductions Are Not Limited? The following Schedule A (Form 1040) deductions are not subject to the overall limit on itemized deductions. Freetaxusa 2009 However, they are still subject to other applicable limits. Freetaxusa 2009 Medical and dental expenses—line 4. Freetaxusa 2009 Investment interest expense—line 14. Freetaxusa 2009 Casualty and theft losses of personal use property—line 20. Freetaxusa 2009 Casualty and theft losses of income-producing property—line 28. Freetaxusa 2009 Gambling losses—line 28. Freetaxusa 2009 How Do You Figure the Limit? If your itemized deductions are subject to the limit, the total of all your itemized deductions is reduced by the smaller of: 80% of your itemized deductions that are affected by the limit. Freetaxusa 2009 See Which Itemized Deductions Are Limited , earlier, or 3% of the amount by which your AGI exceeds $300,000 if married filing jointly or qualifying widow(er), $275,000 if head of household, $250,000 if single, or $150,000 if married filing separately. Freetaxusa 2009 Before you figure the overall limit on itemized deductions, you first must complete Schedule A (Form 1040), lines 1 through 28, including any related forms (such as Form 2106, Form 4684, etc. Freetaxusa 2009 ). Freetaxusa 2009 The overall limit on itemized deductions is figured after you have applied any other limit on the allowance of any itemized deduction. Freetaxusa 2009 These other limits include charitable contribution limits (chapter 24), the limit on certain meal and entertainment expenses (chapter 26), and the 2%-of-adjusted-gross-income limit on certain miscellaneous deductions (chapter 28). Freetaxusa 2009 Itemized Deductions Worksheet. Freetaxusa 2009 After you have completed Schedule A (Form 1040) through line 28, you can use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your limit. Freetaxusa 2009 Enter the result on Schedule A (Form 1040), line 29. Freetaxusa 2009 Keep the worksheet for your records. Freetaxusa 2009 You should compare the amount of your standard deduction to the amount of your itemized deductions after applying the limit. Freetaxusa 2009 Use the greater amount when completing Form 1040, line 40. Freetaxusa 2009 See chapter 20 for information on how to figure your standard deduction. Freetaxusa 2009 Example. Freetaxusa 2009 For tax year 2013 Bill and Terry Willow are filing a joint return on Form 1040. Freetaxusa 2009 Their adjusted gross income on line 38 is $325,500. Freetaxusa 2009 Their Schedule A itemized deductions are as follows: Taxes paid—line 9 $17,900 Interest paid—lines 10, 11, 12, and 13 45,000 Investment interest expense—line 14 41,000 Gifts to charity—line 19 21,000 Job expenses—line 27 17,240 Total $142,140 The Willows’ investment interest expense deduction ($41,000 from Schedule A (Form 1040), line 14) is not subject to the overall limit on itemized deductions. Freetaxusa 2009 The Willows use the Itemized Deductions Worksheet in the Schedule A (Form 1040) instructions to figure their overall limit. Freetaxusa 2009 Of their $142,140 total itemized deductions, the Willows can deduct only $141,375 ($142,140 - $765). Freetaxusa 2009 They enter $141,375 on Schedule A (Form 1040), line 29. Freetaxusa 2009 Prev Up Next Home More Online Publications