Am I Required to File Schedule SE for Self Employment Income?

The schedules of the Federal Income Tax form 1040 are designed to make figuring tax liability easy. Schedules may be filed or not filed depending on a tax payer’s tax situation and preferences. Schedule SE is used to report net earnings arising from Self Employment. The Social Security Administration uses this filing to figure tax payers’ benefits under the U.S. social security program. This tax is required at any age and applies even if the tax payer is already receiving social security or Medicare benefits.

As a self-employed tax payer, individuals must pay Self-Employment tax if net earnings were greater than $400. Anyone in business is considered to be self employed. This tax also applies to certain partnership income and any guaranteed payments. Church employees earning more than $108.28 must file Schedule SE and pay self-employment tax. This type of income is any wages paid to an individual from a church or organization that has elected an exemption from employer social security or Medicare taxes. This tax excludes ministers or members of a religious order.

Ministers, members of a religious order who have not taken a vow of poverty, and Christian Science practitioners also must file Schedule SE and pay self-employment tax. By filing form 4029, some individuals who conscientiously object to social security insurance are exempt from filing and paying self-employment taxes from Schedule SE. However, the religious sect must have been in existence at all times December 31st, 1950 for the 2008 tax year and must have provided a “reasonable level of living for its dependent members.”

Tax payers employed by a foreign government must pay self-employment tax and file Schedule SE for employment in the U.S., Puerto Rico, Guam, American Samoa, the Northern Mariana Islands, and the U.S. Virgin Islands. Income from employment of tax payers elsewhere for a foreign government or organization is exempt from declaring earnings with Schedule SE. For U.S. citizens living outside the U.S. and for resident aliens, the laws regarding payment of self-employment tax are complicated. Consultation with the Schedule SE Instructions will help determine tax liability from self-employment status.

Self-employment tax is required for tax payers who own a business, receive monies from a partnership, or work for a church or religious institution. Generally, tax payers who are also required to file Schedule C, profit or loss from a business, or Schedule F, profit or loss from farming, are required to file Schedule SE. These individuals make up a large part of self-employed tax payers. There are two SE forms available, a short and long version. Following a flow chart of questions in Schedule SE's instructions will help determine which form is required.

Always consult with a tax professional for questions about your tax liability.