Self-Employment Tax

Introduction	1401
Who is Covered by the Self-Employment Tax	1402
Clergy	1403
What is “Self-Employment”	1404
How to Report Self-Employment Income	1405
Husband and Wife	1406
Computation of Self-Employment Income	1407
Computation of the Self-Employment Tax	1408
Taxpayers Receiving Wages and Self-Employment Income	1409
Optional Self-Employment Tax Computation	1410
Social Security Number	1411

Early Attempts at Income Taxation	101
The Present Income Tax Law	102
Introduction – General Principles – Definitions	103
Classification of Taxpayers	104
Purpose of the Income Tax Return – Withholding and Estimated Tax	105
Accounting Period -The Taxable Year	106
Accounting Methods	107
The Cash Basis	108
The Accrual Basis	109
Change in Accounting Method	110
When to File the Income Tax Return	111
Penalties	112
Installment Payment of Tax	112A
Where and How To File Manual and Electronic Filing	113
Who Must File a Return	114
Joint Return of Husband & Wife	115
Separate Return of Husband & Wife	116
Who is considered as “Married”?	117
Special Provision for Married Persons Living Apart	118
Minors	119
The Tax Return Forms and Schedules	120
Payment of the Tax	121
Section II
Introduction	122
Gross Income	123
Deductions from Gross Income	124
Adjusted Gross Income	125
Deductions from Adjusted Gross Income	126
Taxable Income	127
Tax Credits	128
The Filing Requirements for Special Taxpayers	129

Self Employment Tax FICA FUTA:

A number of years ago Congress established the Social Security system to provide for:

Old age retirement and disability benefits for retired workers and their families under the Federal Insurance Contributions Act (FICA), and,
The administration of the Federal-State Unemployment Compensation Program under the Federal Unemployment Tax Act (FUTA).

The money necessary for these programs is raised through two separate taxes, called “FICA” and “FUTA” taxes. However, both the FICA tax and the FUTA tax are payroll taxes and thus apply only to individuals who receive salaries or wages as employees. Hence, individuals who are not employees were neither subject to the taxes nor were eligible to receive the benefits provided under the Act.

Congress, however, later felt that individuals who are in business for themselves or “self-employed” should also participate in the old-age and disability benefit program in order that they may be eligible for retirement and disability benefits. Accordingly, in 1951, Congress enacted the Self- Employment Act which provided for a separate self-employment tax on income from self-employment and which is paid into the general social security fund which finances the payment of retirement and disability benefits to self-employed individuals. When the “medicare” program was enacted in 1965, the self- employment tax was increased to include the hospital insurance (medicare) tax.

In other words, the self-employment tax consists of two components: (1) social security tax, and (2) medicare tax.

The self-employment tax is a separate tax and has no connection with the income tax. However, individuals subject to the self-employment tax must attach their self-employment tax schedule to the income tax return and pay the self-employment tax together with their income tax. For this reason the tax practitioner must be thoroughly familiar with the provisions of the self-employment tax.

Syllabus

Introduction	1401
Who is Covered by the Self-Employment Tax	1402
Clergy	1403
What is “Self-Employment”	1404
How to Report Self-Employment Income	1405
Husband and Wife	1406
Computation of Self-Employment Income	1407
Computation of the Self-Employment Tax	1408
Taxpayers Receiving Wages and Self-Employment Income	1409
Optional Self-Employment Tax Computation	1410
Social Security Number	1411

Early Attempts at Income Taxation	101
The Present Income Tax Law	102
Introduction – General Principles – Definitions	103
Classification of Taxpayers	104
Purpose of the Income Tax Return – Withholding and Estimated Tax	105
Accounting Period -The Taxable Year	106
Accounting Methods	107
The Cash Basis	108
The Accrual Basis	109
Change in Accounting Method	110
When to File the Income Tax Return	111
Penalties	112
Installment Payment of Tax	112A
Where and How To File Manual and Electronic Filing	113
Who Must File a Return	114
Joint Return of Husband & Wife	115
Separate Return of Husband & Wife	116
Who is considered as “Married”?	117
Special Provision for Married Persons Living Apart	118
Minors	119
The Tax Return Forms and Schedules	120
Payment of the Tax	121
Section II
Introduction	122
Gross Income	123
Deductions from Gross Income	124
Adjusted Gross Income	125
Deductions from Adjusted Gross Income	126
Taxable Income	127
Tax Credits	128
The Filing Requirements for Special Taxpayers	129