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Turbotax 2011 Tax Return

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Turbotax 2011 Tax Return

Turbotax 2011 tax return 12. Turbotax 2011 tax return   Self-Employment Tax Table of Contents What's New for 2013 What's New for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Why Pay Self-Employment Tax? How To Pay Self-Employment TaxReplacing a lost social security card. Turbotax 2011 tax return Name change. Turbotax 2011 tax return Penalty for underpayment of estimated tax. Turbotax 2011 tax return Who Must Pay Self-Employment Tax?Limited partner. Turbotax 2011 tax return Community property. Turbotax 2011 tax return Figuring Self-Employment EarningsLandlord Participation in Farming Methods for Figuring Net EarningsRegular Method Farm Optional Method Nonfarm Optional Method Using Both Optional Methods Reporting Self-Employment Tax What's New for 2013 Tax rates. Turbotax 2011 tax return  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Turbotax 2011 tax return 4% to 12. Turbotax 2011 tax return 4%. Turbotax 2011 tax return The Medicare part of the tax remains at 2. Turbotax 2011 tax return 9%. Turbotax 2011 tax return As a result, the self-employment tax is increased from 13. Turbotax 2011 tax return 3% to 15. Turbotax 2011 tax return 3%. Turbotax 2011 tax return Additional Medicare Tax. Turbotax 2011 tax return . Turbotax 2011 tax return  For tax years beginning in 2013, a 0. Turbotax 2011 tax return 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Turbotax 2011 tax return Use Form 8959, Additional Medicare Tax, to figure this tax. Turbotax 2011 tax return For more information, see the Instructions for Form 8959. Turbotax 2011 tax return Maximum net earnings. Turbotax 2011 tax return  The maximum net self-employment earnings subject to the social security part (12. Turbotax 2011 tax return 4%) of the self-employment tax increased to $113,700 for 2013. Turbotax 2011 tax return There is no maximum limit on earnings subject to the Medicare part (2. Turbotax 2011 tax return 9%). Turbotax 2011 tax return What's New for 2014 Maximum net earnings. Turbotax 2011 tax return  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. Turbotax 2011 tax return Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Turbotax 2011 tax return It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. Turbotax 2011 tax return You usually have to pay SE tax if you are self-employed. Turbotax 2011 tax return You are usually self-employed if you operate your own farm on land you either own or rent. Turbotax 2011 tax return You have to figure SE tax on Schedule SE (Form 1040). Turbotax 2011 tax return Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. Turbotax 2011 tax return See chapter 13 for information on employment taxes. Turbotax 2011 tax return Self-employment tax rate. Turbotax 2011 tax return   For tax years beginning in 2013, the self-employment tax rate is 15. Turbotax 2011 tax return 3%. Turbotax 2011 tax return The rate consists of two parts: 12. Turbotax 2011 tax return 4% for social security (old-age, survivors, and disability insurance) and 2. Turbotax 2011 tax return 9% for Medicare (hospital insurance). Turbotax 2011 tax return Topics - This chapter discusses: Why pay self-employment tax How to pay self-employment tax Who must pay self-employment tax Figuring self-employment earnings Landlord participation in farming Methods for figuring net earnings Reporting self-employment tax Useful Items - You may want to see: Publication 541 Partnerships Form (and Instructions) 1040 U. Turbotax 2011 tax return S. Turbotax 2011 tax return Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. Turbotax 2011 tax return S. Turbotax 2011 tax return Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Turbotax 2011 tax return See chapter 16 for information about getting publications and forms. Turbotax 2011 tax return Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. Turbotax 2011 tax return Your payments of SE tax contribute to your coverage under the social security system. Turbotax 2011 tax return Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Turbotax 2011 tax return How to become insured under social security. Turbotax 2011 tax return   You must be insured under the social security system before you begin receiving social security benefits. Turbotax 2011 tax return You are insured if you have the required number of credits (also called quarters of coverage). Turbotax 2011 tax return Earning credits in 2013. Turbotax 2011 tax return   You can earn a maximum of four credits per year. Turbotax 2011 tax return For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. Turbotax 2011 tax return You need $4,640 ($1,160 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2013. Turbotax 2011 tax return It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. Turbotax 2011 tax return For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest Social Security Administration (SSA) office or visit the SSA website at www. Turbotax 2011 tax return socialsecurity. Turbotax 2011 tax return gov. Turbotax 2011 tax return Making false statements to get or to increase social security benefits may subject you to penalties. Turbotax 2011 tax return The Social Security Administration (SSA) time limit for posting self-employment earnings. Turbotax 2011 tax return   Generally, the SSA will give you credit only for self-employment earnings reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Turbotax 2011 tax return    If you file your tax return or report a change in your self-employment earnings after the SSA time limit for posting self-employment earnings, the SSA may change its records, but only to remove or reduce the amount. Turbotax 2011 tax return The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. Turbotax 2011 tax return How To Pay Self-Employment Tax To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN). Turbotax 2011 tax return This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. Turbotax 2011 tax return An ITIN does not entitle you to social security benefits. Turbotax 2011 tax return Obtaining an ITIN does not change your immigration or employment status under U. Turbotax 2011 tax return S. Turbotax 2011 tax return law. Turbotax 2011 tax return Obtaining a social security number. Turbotax 2011 tax return   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. Turbotax 2011 tax return The application is also available in Spanish. Turbotax 2011 tax return You can get this form at any Social Security office or by calling 1-800-772-1213. Turbotax 2011 tax return    You can also download Form SS-5 from the Social Security Administration website at  www. Turbotax 2011 tax return socialsecurity. Turbotax 2011 tax return gov. Turbotax 2011 tax return   If you have a social security number from the time you were an employee, you must use that number. Turbotax 2011 tax return Do not apply for a new one. Turbotax 2011 tax return Replacing a lost social security card. Turbotax 2011 tax return   If you have a number but lost your card, file Form SS-5. Turbotax 2011 tax return You will get a new card showing your original number, not a new number. Turbotax 2011 tax return Name change. Turbotax 2011 tax return   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. Turbotax 2011 tax return Obtaining an individual taxpayer identification number. Turbotax 2011 tax return   The IRS will issue you an ITIN, for tax use only, if you are a nonresident or resident alien and you do not have, and are not eligible to get, an SSN. Turbotax 2011 tax return To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. Turbotax 2011 tax return You can get this form by calling 1-800-829-3676. Turbotax 2011 tax return For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. Turbotax 2011 tax return Form W-7 and Publication 1915 are also available in Spanish. Turbotax 2011 tax return    You can also download Form W-7 from the IRS website at IRS. Turbotax 2011 tax return gov. Turbotax 2011 tax return Paying estimated tax. Turbotax 2011 tax return   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. Turbotax 2011 tax return You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. Turbotax 2011 tax return Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. Turbotax 2011 tax return   However, if at least two-thirds of your gross income for 2013 or 2014 was from farming and you file your 2014 Form 1040 and pay all the tax due by March 2, 2015, you do not have to pay any estimated tax. Turbotax 2011 tax return For more information about estimated tax for farmers, see chapter 15. Turbotax 2011 tax return Penalty for underpayment of estimated tax. Turbotax 2011 tax return   You may have to pay a penalty if you do not pay enough estimated tax by its due date. Turbotax 2011 tax return Who Must Pay Self-Employment Tax? You must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Turbotax 2011 tax return The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. Turbotax 2011 tax return Aliens. Turbotax 2011 tax return   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Turbotax 2011 tax return S. Turbotax 2011 tax return citizens. Turbotax 2011 tax return Nonresident aliens are not subject to self-employment tax. Turbotax 2011 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. Turbotax 2011 tax return S. Turbotax 2011 tax return residents for self-employment tax purposes. Turbotax 2011 tax return For more information on aliens, see Publication 519, U. Turbotax 2011 tax return S. Turbotax 2011 tax return Tax Guide for Aliens. Turbotax 2011 tax return Are you self-employed?   You are self-employed if you carry on a trade or business (such as running a farm) as a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself. Turbotax 2011 tax return A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. Turbotax 2011 tax return Share farmer. Turbotax 2011 tax return   You are a self-employed farmer under an income-sharing arrangement if both the following apply. Turbotax 2011 tax return You produce a crop or raise livestock on land belonging to another person. Turbotax 2011 tax return Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. Turbotax 2011 tax return Your net farm profit or loss from the income-sharing arrangement is reported on Schedule F (Form 1040) and included in your self-employment earnings. Turbotax 2011 tax return   If you produce a crop or livestock on land belonging to another person and are to receive a specified rate of pay, a fixed sum of money, or a fixed quantity of the crop or livestock, and not a share of the crop or livestock or their proceeds, you may be either self-employed or an employee of the landowner. Turbotax 2011 tax return This will depend on whether the landowner has the right to direct or control your performance of services. Turbotax 2011 tax return Example. Turbotax 2011 tax return A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. Turbotax 2011 tax return Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. Turbotax 2011 tax return The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. Turbotax 2011 tax return The share farmer is provided a house in which to live. Turbotax 2011 tax return The landowner and the share farmer decide on a cropping plan. Turbotax 2011 tax return The share farmer is a self-employed farmer for purposes of the agreement to produce the crops, and the share farmer's part of the profit or loss from the crops is reported on Schedule F (Form 1040) and included in self-employment earnings. Turbotax 2011 tax return The tax treatment of the landowner is discussed later under Landlord Participation in Farming. Turbotax 2011 tax return Contract farming. Turbotax 2011 tax return   Under typical contract farming arrangements, the grower receives a fixed payment per unit of crops or finished livestock delivered to the processor or packing company. Turbotax 2011 tax return Since the grower typically furnishes labor and bears some production risk, the payments are reported on Schedule F and are therefore subject to self-employment tax. Turbotax 2011 tax return 4-H Club or FFA project. Turbotax 2011 tax return   If an individual participates in a 4-H Club or Future Farmers of America (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. Turbotax 2011 tax return Report the net income as “Other income” on line 21 of Form 1040. Turbotax 2011 tax return If necessary, attach a statement showing the gross income and expenses. Turbotax 2011 tax return The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. Turbotax 2011 tax return Such a project is generally not considered a trade or business. Turbotax 2011 tax return Partners in a partnership. Turbotax 2011 tax return   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. Turbotax 2011 tax return Limited partner. Turbotax 2011 tax return   If you are a limited partner, your partnership income is generally not subject to SE tax. Turbotax 2011 tax return However, guaranteed payments you receive for services you perform for the partnership are subject to SE tax and should be reported to you in box 14 of your Schedule K-1 (Form 1065). Turbotax 2011 tax return Business Owned and Operated by Spouses. Turbotax 2011 tax return   If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. Turbotax 2011 tax return You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. Turbotax 2011 tax return Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Turbotax 2011 tax return Qualified joint venture. Turbotax 2011 tax return   If you and your spouse each materially participate as the only members of a jointly owned and operated farm, and you file a joint tax return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Turbotax 2011 tax return For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. Turbotax 2011 tax return   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Turbotax 2011 tax return Each of you must file a separate Schedule F and a separate Schedule SE. Turbotax 2011 tax return For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). Turbotax 2011 tax return Spouse employee. Turbotax 2011 tax return   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. Turbotax 2011 tax return For more information about employment taxes, see chapter 13. Turbotax 2011 tax return Community property. Turbotax 2011 tax return   If you are a partner and your distributive share of any income or loss from a trade or business carried on by the partnership is community property, treat your share as your self-employment earnings. Turbotax 2011 tax return Do not treat any of your share as self-employment earnings of your spouse. Turbotax 2011 tax return Figuring Self-Employment Earnings Farmer. Turbotax 2011 tax return   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. Turbotax 2011 tax return Partnership income or loss. Turbotax 2011 tax return   If you are a member of a partnership that carries on a trade or business, the partnership should report your self-employment earnings in box 14, code A, of your Schedule K-1 (Form 1065). Turbotax 2011 tax return Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). Turbotax 2011 tax return Use these amounts if you use the farm or nonfarm optional method to figure net earnings from self-employment (see Methods for Figuring Net Earnings , later). Turbotax 2011 tax return   If you are a general partner, you may need to reduce these reported earnings by amounts you claim as a section 179 deduction, unreimbursed partnership expenses, or depletion on oil and gas properties. Turbotax 2011 tax return   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. Turbotax 2011 tax return   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). Turbotax 2011 tax return   For general information on partnerships, see Publication 541. Turbotax 2011 tax return More than one business. Turbotax 2011 tax return   If you have self-employment earnings from more than one trade, business, or profession, you generally must combine the net profit or loss from each to determine your total self-employment earnings. Turbotax 2011 tax return A loss from one business reduces your profit from another business. Turbotax 2011 tax return However, do not combine earnings from farm and nonfarm businesses if you are using one of the optional methods (discussed later) to figure net earnings. Turbotax 2011 tax return Community property. Turbotax 2011 tax return   If any of the income from a farm or business, other than a partnership, is community property under state law, it is included in the self-employment earnings of the spouse carrying on the trade or business. Turbotax 2011 tax return Lost income payments. Turbotax 2011 tax return   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. Turbotax 2011 tax return These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. Turbotax 2011 tax return Even if you are not farming when you receive the payment, it is included in self-employment earnings if it relates to your farm business (even though it is temporarily inactive). Turbotax 2011 tax return A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. Turbotax 2011 tax return Gain or loss. Turbotax 2011 tax return   A gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers is not included in self-employment earnings. Turbotax 2011 tax return It does not matter whether the disposition is a sale, exchange, or involuntary conversion. Turbotax 2011 tax return For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. Turbotax 2011 tax return Investment property. Turbotax 2011 tax return Depreciable property or other fixed assets used in your trade or business. Turbotax 2011 tax return Livestock held for draft, breeding, sport, or dairy purposes, and not held primarily for sale, regardless of how long the livestock was held, or whether it was raised or purchased. Turbotax 2011 tax return Unharvested standing crops sold with land held more than 1 year. Turbotax 2011 tax return Timber, coal, or iron ore held for more than 1 year if an economic interest was retained, such as a right to receive coal royalties. Turbotax 2011 tax return   A gain or loss from the cutting of timber is not included in self-employment earnings if the cutting is treated as a sale or exchange. Turbotax 2011 tax return For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. Turbotax 2011 tax return Wages and salaries. Turbotax 2011 tax return   Wages and salaries received for services performed as an employee and covered by social security or railroad retirement are not included in self-employment earnings. Turbotax 2011 tax return   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. Turbotax 2011 tax return Retired partner. Turbotax 2011 tax return   Retirement income received by a partner from his or her partnership under a written plan is not included in self-employment earnings if all the following apply. Turbotax 2011 tax return The retired partner performs no services for the partnership during the year. Turbotax 2011 tax return The retired partner is owed only the retirement payments. Turbotax 2011 tax return The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. Turbotax 2011 tax return The payments to the retired partner are lifelong periodic payments. Turbotax 2011 tax return Conservation Reserve Program (CRP) payments. Turbotax 2011 tax return   Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a longterm contract with the USDA, agreeing to convert to a less intensive use of that cropland. Turbotax 2011 tax return You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. Turbotax 2011 tax return Cost share payments you receive may qualify for the costsharing exclusion. Turbotax 2011 tax return See Cost-Sharing Exclusion (Improvements), above. Turbotax 2011 tax return CRP payments are reported to you on Form 1099G. Turbotax 2011 tax return Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Turbotax 2011 tax return See the instructions for Schedule SE (Form 1040). Turbotax 2011 tax return Self-employed health insurance deduction. Turbotax 2011 tax return   You cannot deduct the self-employed health insurance deduction you report on Form 1040, line 29, from self-employment earnings on Schedule SE (Form 1040). Turbotax 2011 tax return Landlord Participation in Farming As a general rule, income and deductions from rentals and from personal property leased with real estate are not included in determining self-employment earnings. Turbotax 2011 tax return However, income and deductions from farm rentals, including government commodity program payments received by a landowner who rents land, are included if the rental arrangement provides that the landowner will, and does, materially participate in the production or management of production of the farm products on the land. Turbotax 2011 tax return Crop shares. Turbotax 2011 tax return   Rent paid in the form of crop shares is included in self-employment earnings for the year you sell, exchange, give away, or use the crop shares if you meet one of the four material participation tests (discussed next) at the time the crop shares are produced. Turbotax 2011 tax return Feeding such crop shares to livestock is considered using them. Turbotax 2011 tax return Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. Turbotax 2011 tax return Material participation for landlords. Turbotax 2011 tax return   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. Turbotax 2011 tax return You do at least three of the following. Turbotax 2011 tax return Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. Turbotax 2011 tax return Furnish at least half the tools, equipment, and livestock used in the production activities. Turbotax 2011 tax return Advise or consult with your tenant. Turbotax 2011 tax return Inspect the production activities periodically. Turbotax 2011 tax return You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. Turbotax 2011 tax return You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. Turbotax 2011 tax return You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. Turbotax 2011 tax return These tests may be used as general guides for determining whether you are a material participant. Turbotax 2011 tax return Example. Turbotax 2011 tax return Drew Houston agrees to produce a crop on J. Turbotax 2011 tax return Clarke's cotton farm, with each receiving half the proceeds. Turbotax 2011 tax return Clarke advises Houston when to plant, spray, and pick the cotton. Turbotax 2011 tax return During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. Turbotax 2011 tax return Houston furnishes all labor needed to grow and harvest the crop. Turbotax 2011 tax return The management decisions made by Clarke in connection with the care of the cotton crop and his regular inspection of the crop establish that he participates to a material degree in the cotton production operations. Turbotax 2011 tax return The income Clarke receives from his cotton farm is included in his self-employment earnings. Turbotax 2011 tax return Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Turbotax 2011 tax return The regular method. Turbotax 2011 tax return The farm optional method. Turbotax 2011 tax return The nonfarm optional method. Turbotax 2011 tax return You must use the regular method unless you are eligible to use one or both of the optional methods. Turbotax 2011 tax return See Figure 12-1 , shown later. Turbotax 2011 tax return Figure 12-1. Turbotax 2011 tax return Can I Use the Optional Methods? Please click here for the text description of the image. Turbotax 2011 tax return Figure 12–1. Turbotax 2011 tax return Can I Use the Optional Methods? 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. Turbotax 2011 tax return You want to receive credit for social security benefit coverage. Turbotax 2011 tax return You incurred child or dependent care expenses for which you could claim a credit. Turbotax 2011 tax return (An optional method may increase your earned income, which could increase your credit. Turbotax 2011 tax return ) You are entitled to the earned income credit. Turbotax 2011 tax return (An optional method may increase your earned income, which could increase your credit. Turbotax 2011 tax return ) You are entitled to the additional child tax credit. Turbotax 2011 tax return (An optional method may increase your earned income, which could increase your credit. Turbotax 2011 tax return ) Effects of using an optional method. Turbotax 2011 tax return   Using an optional method could increase your SE tax. Turbotax 2011 tax return Paying more SE tax may result in you getting higher social security disability or retirement benefits. Turbotax 2011 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 SE tax or no SE tax using the regular method. Turbotax 2011 tax return   The optional methods may be used only to figure your SE tax. Turbotax 2011 tax return To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. Turbotax 2011 tax return Regular Method Multiply your total self-employment earnings by 92. Turbotax 2011 tax return 35% (. Turbotax 2011 tax return 9235) to get your net earnings under the regular method. Turbotax 2011 tax return See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Turbotax 2011 tax return Net earnings figured using the regular method are also called “actual net earnings. Turbotax 2011 tax return ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. Turbotax 2011 tax return You can use this method if you meet either of the following tests. Turbotax 2011 tax return Your gross farm income is $6,960 or less. Turbotax 2011 tax return Your net farm profits are less than $5,024. Turbotax 2011 tax return Gross farm income. Turbotax 2011 tax return   Your gross farm income is the total of the amounts from: Schedule F (Form 1040), line 9, and Schedule K-1 (Form 1065), box 14, code B (from farm partnerships). Turbotax 2011 tax return Net farm profits. Turbotax 2011 tax return   Net farm profits generally are the total of the amounts from: Schedule F (Form 1040), line 34, and Schedule K-1 (Form 1065), box 14, code A (from farm partnerships). Turbotax 2011 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. Turbotax 2011 tax return For more information, see Partnership income or loss , earlier. Turbotax 2011 tax return Figuring farm net earnings. Turbotax 2011 tax return   If you meet either of the two tests explained above, use Table 12-1. Turbotax 2011 tax return Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. Turbotax 2011 tax return Table 12-1. Turbotax 2011 tax return Figuring Farm Net Earnings IF your gross farm income  is. Turbotax 2011 tax return . Turbotax 2011 tax return . Turbotax 2011 tax return THEN your net earnings are equal to. Turbotax 2011 tax return . Turbotax 2011 tax return . Turbotax 2011 tax return $6,960 or less Two-thirds of your gross farm income. Turbotax 2011 tax return More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. Turbotax 2011 tax return   If your gross farm income is $6,960 or less and your farm net earnings figured under the farm optional method are less than your actual net earnings, you can use the farm optional method to reduce or eliminate your SE tax. Turbotax 2011 tax return Your actual net earnings are your net earnings figured using the regular method, explained earlier. Turbotax 2011 tax return Example. Turbotax 2011 tax return Your gross farm income is $540 and your net farm profit is $460. Turbotax 2011 tax return Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. Turbotax 2011 tax return 35% of $460). Turbotax 2011 tax return You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. Turbotax 2011 tax return Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. Turbotax 2011 tax return If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. Turbotax 2011 tax return You can use this method even if you do not use the farm optional method for determining your farm net earnings and even if you have a net loss from your nonfarm business. Turbotax 2011 tax return For more information about the nonfarm optional method, see Publication 334. Turbotax 2011 tax return You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. Turbotax 2011 tax return Using Both Optional Methods If you use both optional methods, you must add the net earnings figured under each method to arrive at your total net earnings from self-employment. Turbotax 2011 tax return You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Turbotax 2011 tax return If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Turbotax 2011 tax return Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Turbotax 2011 tax return Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Turbotax 2011 tax return Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. Turbotax 2011 tax return However, certain taxpayers must use Section B–Long Schedule SE. Turbotax 2011 tax return Use the chart on page 1 of Schedule SE to find out which one to use. Turbotax 2011 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. Turbotax 2011 tax return Deduction for employer-equivalent portion of self-employment tax. Turbotax 2011 tax return   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. Turbotax 2011 tax return This deduction only affects your income tax. Turbotax 2011 tax return It does not affect either your net earnings from self-employment or your SE tax. Turbotax 2011 tax return   To deduct the tax, enter on Form 1040, line 27, the amount shown on Section A, Line 6, or Section B, line 13, Deduction for employer-equivalent portion of self-employment tax, of the Schedule SE. Turbotax 2011 tax return Joint return. Turbotax 2011 tax return   Even if you file a joint return, you cannot file a joint Schedule SE. Turbotax 2011 tax return This is true whether one spouse or both spouses have self-employment earnings. Turbotax 2011 tax return Your spouse is not considered self-employed just because you are. Turbotax 2011 tax return If both of you have self-employment earnings, each of you must complete a separate Schedule SE. Turbotax 2011 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. Turbotax 2011 tax return Attach both schedules to the joint return. Turbotax 2011 tax return If you and your spouse operate a business as a partnership, see Business Owned and Operated by Spouses and Qualified joint venture , earlier, under Who Must Pay Self-Employment Tax . Turbotax 2011 tax return Prev  Up  Next   Home   More Online Publications
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Employee Tool & Equipment Plans

This resource page provides information and guidance related to Employee Tool and Equipment Plans, sometimes called Service Technician’s Tool Reimbursement Plans (Tool Plans). Tool Plans are programs that are marketed in various industries including auto dealership and repair facilities and other trades that require employees to provide their own tools. The plans typically purport to receive tax-favored treatment as “accountable plans” under Internal Revenue Code § 62(c) and the accompanying regulations.

Available Guidance and other Information

View recent Department of Justice activity

Revenue Rule 2012-25
Revenue Rule 2012-25 clarifies that an arrangement that recharacterizes taxable wages as nontaxable reimbursements or allowances does not satisfy the business connection requirement of the accountable plan rules under § 62(c) and the applicable regulations.  The ruling includes three examples of programs that do not satisfy the business connection requirement of the accountable plan rules because they impermissibly recharacterize wages.  It also includes an example in which the reimbursement arrangement satisfies the business connection requirement of the accountable plan rules because the employer’s plan only reimburses employees when a deductible business expense has been incurred in connection with performing services for the employer and the reimbursement is not in lieu of wages that the employees would otherwise receive.

ILM 201120021
A reimbursement or other expense allowance arrangement that pays an amount regardless of whether an expense is paid or incurred or reasonably expected to be paid or incurred by the employee in performing services for the employer violates the business connection requirement of an accountable plan. Specifically, such an arrangement violates the business connection’s reimbursement requirement under Treas. Reg. § 1.62-2(d)(3)(i). Accordingly, payments made under the arrangement are treated as made under a nonaccountable plan. Amounts treated as paid under a nonaccountable plan must be included in the employee’s gross income for the taxable year, are subject to withholding and payment of employment taxes, and must be reported as wages or other compensation on the employee’s Form W-2.

Employee Tool & Equipment Plans Alert
The Internal Revenue Service has established a compliance team to address significant concerns with certain Employee Tool and Equipment Plans that purport to receive tax-favored treatment as accountable plans.

IRS Letter Ruling 200930029
An employer's expense reimbursement plan satisfies the business connection, substantiation, and return of excess requirements of an accountable plan.  Payments made under the Plan in accordance with the terms of the plan will be excluded from the Technician’s income and will not be wages subject to the withholding and payment of employment taxes.

Chief Counsel Advice -   ILM 200745018
A legal memorandum that concludes that an employer's tool reimbursement plan does not satisfy the requirements of an accountable plan. 

Revenue Ruling 2005-52
This ruling holds that tool allowances paid to employees are not paid under an accountable plan because the substantiation and return of excess requirements are not met. 

 

Page Last Reviewed or Updated: 13-Feb-2014

The Turbotax 2011 Tax Return

Turbotax 2011 tax return Publication 969 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Turbotax 2011 tax return Tax questions. Turbotax 2011 tax return What's New Federal tax benefits for same-sex married couples. Turbotax 2011 tax return   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Turbotax 2011 tax return For more information, see Publication 501. Turbotax 2011 tax return Health flexible spending arrangements (FSAs). Turbotax 2011 tax return  The following rules apply to health FSAs for plan years beginning after December 31, 2012. Turbotax 2011 tax return Salary reduction contributions to your health FSA cannot be more than $2,500 a year (indexed for inflation). Turbotax 2011 tax return Your employer may choose to change your cafeteria plan to allow you to carry over up to $500 of unused amounts remaining at the end of the plan year in a health FSA to be paid or reimbursed for qualified medical expenses incurred during the following plan year. Turbotax 2011 tax return For more information, see Balance in an FSA under Flexible Spending Arrangements (FSAs), later. Turbotax 2011 tax return Reminders Future Developments. Turbotax 2011 tax return  For the latest information about developments related to Publication 969, such as legislation enacted after it was published, go to www. Turbotax 2011 tax return IRS. Turbotax 2011 tax return gov/pub969. Turbotax 2011 tax return Photographs of missing children. Turbotax 2011 tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Turbotax 2011 tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Turbotax 2011 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Turbotax 2011 tax return Introduction Various programs are designed to give individuals tax advantages to offset health care costs. Turbotax 2011 tax return This publication explains the following programs. Turbotax 2011 tax return Health savings accounts (HSAs). Turbotax 2011 tax return Medical savings accounts (Archer MSAs and Medicare Advantage MSAs). Turbotax 2011 tax return Health flexible spending arrangements (FSAs). Turbotax 2011 tax return Health reimbursement arrangements (HRAs). Turbotax 2011 tax return An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Turbotax 2011 tax return Contributions, other than employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions. Turbotax 2011 tax return Employer contributions are not included in income. Turbotax 2011 tax return Distributions from an HSA that are used to pay qualified medical expenses are not taxed. Turbotax 2011 tax return An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year. Turbotax 2011 tax return Contributions by the individual are deductible whether or not the individual itemizes deductions. Turbotax 2011 tax return Employer contributions are not included in income. Turbotax 2011 tax return Distributions from an Archer MSA that are used to pay qualified medical expenses are not taxed. Turbotax 2011 tax return A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is enrolled in Medicare. Turbotax 2011 tax return Contributions can only be made by Medicare. Turbotax 2011 tax return The contributions are not included in your income. Turbotax 2011 tax return Distributions from a Medicare Advantage MSA that are used to pay qualified medical expenses are not taxed. Turbotax 2011 tax return A health FSA may receive contributions from an eligible individual. Turbotax 2011 tax return Employers may also contribute. Turbotax 2011 tax return Contributions are not includible in income. Turbotax 2011 tax return Reimbursements from an FSA that are used to pay qualified medical expenses are not taxed. Turbotax 2011 tax return An HRA must receive contributions from the employer only. Turbotax 2011 tax return Employees may not contribute. Turbotax 2011 tax return Contributions are not includible in income. Turbotax 2011 tax return Reimbursements from an HRA that are used to pay qualified medical expenses are not taxed. Turbotax 2011 tax return Comments and suggestions. Turbotax 2011 tax return   We welcome your comments about this publication and your suggestions for future editions. Turbotax 2011 tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Turbotax 2011 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Turbotax 2011 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Turbotax 2011 tax return   You can send your comments from www. Turbotax 2011 tax return irs. Turbotax 2011 tax return gov/formspubs. Turbotax 2011 tax return Click on “More Information” and then on “Comment on Tax Forms and Publications. Turbotax 2011 tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Turbotax 2011 tax return Ordering forms and publications. Turbotax 2011 tax return   Visit www. Turbotax 2011 tax return irs. Turbotax 2011 tax return gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Turbotax 2011 tax return Internal Revenue Service 1201 N. Turbotax 2011 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Turbotax 2011 tax return   If you have a tax question, check the information available on IRS. Turbotax 2011 tax return gov or call 1-800-829-1040. Turbotax 2011 tax return We cannot answer tax questions sent to either of the above addresses. Turbotax 2011 tax return Prev  Up  Next   Home   More Online Publications