Filing Schedule SE for Self-Employment Tax

Schedule SE for Self-employment Taxes
Schedule SE for Self-employment Taxes. Bruce Forster/Getty Images

Schedule SE calculates the amount of self-employment tax owed by a business owner, based on the profit (loss) of the owner's business (sole proprietorship or single-member limited liability company (LLC)) during the year. The self-employment taxes owed based on Schedule SE are for Social Security and Medicare. 

What is Self-Employment Tax and Why Must I Pay It?

Remember that saying that the only two things that are certain are death and taxes?

Well, self-employment tax is one of those taxes everyone must pay. Self-employment tax is based on the income of a business owner and it's collected for Social Security and Medicare purposes. 

Most people work for someone else and their Social Security/Medicare taxes are collected from their earnings from a job. But a self-employed business owner doesn't get a paycheck, so the IRS gets these taxes through the self-employment tax. 

Who Is Considered Self-Employed for Self-Employment Tax Purposes?

Self-employed business owners include sole proprietors or single-member limited liability company (LLC) and for partners on their share of partnership income. Members in multiple-member LLCs are considered as partners for federal income tax purposes. The self-employment taxes owed based on Schedule SE are for Social Security and Medicare.

Calculating Self-Employment Tax on Schedule SE

To calculate self-employment tax, you must first determine the net income from your business (or all businesses you own added together.

Net profit from a business is calculated on Schedule C. Then, the process of completing Schedule SE for self-employment taxes is done in two parts:

  • First, a calculation to determine the amount of the deduction for self-employment tax, to be entered in Line 27 of Form 1040. This deduction is entered on page one of your tax return, so it reduces your adjusted gross income (your net taxable income before deductions).
  • Second, the amount of self-employment tax is calculated. The total net profit from all businesses is considered, but only the first $106,800 is taxable for Social Security purposes.

These instructions are for a very simple Schedule SE for an individual with only Schedule C income from self-employment. Consult your tax professional for more complex situations.

Long Form and Short Form Calculation

Schedule SE includes both a short form and long form. If you had no income other than your self-employed income (and you meet other qualifications), you may complete the short form in Section A. Otherwise, you must complete the long form in Section B of your tax return. 

Documents Needed to Calculate Self-employment Tax

  • A copy of Schedule SE (PDF) downloaded from the IRS website (you can fill in the form online, save, and print)
  • Your completed Schedule C for each business you own.
  • A copy of any W-2 forms for the year, showing Social Security and Medicare compensation for the year (boxes 3 and 7)
  • Your individual income tax form (IRS Form 1040 or other)

Completing the Short Form Schedule SE

If you have no income described in item 1(a, b), start with Line 2, inserting the net income from your Schedule C (if you have more than one Schedule C, total all and insert the total in Line 2).

Total in Line 3.

  • Line 4: Multiply Line 3 by 92.35%. If less than $400, you don't owe self-employment tax.
  • Line 5. Calculate self-employment tax:
    • If $106,800 or less, multiply line 4 by 15.3%
    • If $106,800 or more, multiply the line 4 by 2.9% then add $13,243 to the result.
  • Include self-employment tax calculation on Form 1040
  • Enter the result from Line 5 on Form 1040, Line 56.
  • Line 6: Multiply Line 5 by 50% and enter of Form 1040, Line 27.
  • Total all income on Line 6
  • Line 8 Add W-2 information on Social Security wages and tips and other wages subject to Social Security tax (Form 8919 is Uncollected Social Security and Medicare Tax on Wages)
  • Total Line 8 items on Line 8d

Long Schedule SE (Section B)

This section is the employment tax calculation for individuals who have income in addition to self-employment income.

The calculation combines FICA tax already paid on other income and self-employed income to determine self-employment tax owed.

  • Line 1, enter net farm income (1a) and/or Social Security income(1b) and total
  • Line 2: Enter Net Income from Schedule C
  • Line 3: total Lines 1 and 2
  • Line 4(a) multiply Line 3 by 92.35%. If less than $400 you do not owe self-employment tax.
  • Include FICA tax (Social Security and Medicare tax) already paid on wages, to determine if any self-employment tax is owed
  • Line 9: Subtract Line 8d from Line 7 (Social Security maximum amount). If zero or less enter -0- and go to Line 11
  • Line 10: Multiply the smaller line 6 or line 9 by 12.4$
  • Line 11: Multiply Line 6 by 2.9%
  • Include Self-employment tax calculation on Form 1040
  • Add Lines 10 and 11 and enter the result on Line 12 and on Form 1040, Line 56.
  • Line 13 Deduction for one-half of self-employment tax: Multiply Line 5 by 50% and enter of Form 1040, Line 27.

How Do I File Schedule SE?

The Schedule SE calculation is entered on IRS Form 1040 in two places:

  • Line 27, which reduces Adjusted Gross Income by half of the self-employment tax amount
  • Line 57, to include the total self-employment tax owed, in addition to personal income taxes.

The amount on Line 57 is added to your personal income tax calculation to show your total federal tax liability for the year.