Instructions For Form 1040-Ss - U.s. Self-Employment Tax Return (Including The Additional Child Tax Credit For Bona Fide Residents Of Puerto Rico) - Internal Revenue Service - 2011 Page 8
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10Line 8c
10. Termination payments you received
self-employment if your net nonfarm
as a former insurance salesperson if all of
profits were less than $4,851 and also
If you are an employee who received
the following conditions are met.
less than 72.189% of your gross nonfarm
wages from an employer who did not
a. The payment was received from an
income. Net nonfarm profits are the total
withhold social security and Medicare tax,
insurance company because of services
of the amounts from Part IV, line 27, and
you must file Form 8919 with Form
you performed as an insurance
your distributive share from other than
1040-SS (see instructions for Part I, line
salesperson for the company.
farm partnerships.
5, earlier). Enter on line 8c the amount
b. The payment was received after
from Form 8919, line 10.
To use this method, you also must be
termination of your agreement to perform
regularly self-employed. You meet this
services for the company.
Part VI—Optional Methods
requirement if your actual net earnings
c. You did not perform any services
from self-employment were $400 or more
To Figure Net Earnings
for the company after termination and
in 2 of the 3 years preceding the year you
before the end of the year in which you
The optional methods may give you credit
use the nonfarm optional method. The net
received the payment.
toward your social security coverage even
earnings of $400 or more could be from
d. You entered into a covenant not to
though you have a loss or a small amount
either farm or nonfarm earnings or both.
compete against the company for at least
of income from self-employment. But the
The net earnings include your distributive
a 1-year period beginning on the date of
optional methods may require you to pay
share of partnership income or loss
termination.
SE tax when you would otherwise not be
subject to SE tax.
e. The amount of the payment
required to pay.
Use of the nonfarm optional method
depended primarily on policies sold by or
If you are filing a joint return and both
from nonfarm self-employment is limited
credited to your account during the last
you and your spouse choose to use an
to 5 years. The 5 years do not have to be
year of the agreement, or the extent to
optional method to figure net earnings
consecutive.
which those policies remain in force for
from self-employment, you must each
some period after termination, or both.
Under this method, report in Part VI,
complete and attach a separate Part VI.
f. The amount of the payment did not
line 4, the smaller of: two-thirds of your
depend to any extent on length of service
You can change the method after you
gross nonfarm income (not less than
or overall earnings from services
file your return. That is, you can change
zero), or the amount in Part VI, line 3. But
performed for the company (regardless of
from the regular to the optional method or
you cannot report less than your actual
whether eligibility for the payment
from the optional to the regular method.
net earnings from nonfarm
depended on length of service).
To do this, file a new Form 1040-SS. See
self-employment.
the instructions under Amended returns
Figure your share of gross income
Line 1b
later.
from a nonfarm partnership in the same
If you were receiving social security
Using the optional methods may
manner as a farm partnership. For details,
retirement or social security disability
qualify bona fide residents of
TIP
see Farm Optional Method earlier.
benefits at the time you received your
Puerto Rico to claim the additional
Using Both Optional Methods
Conservation Reserve Program (CRP)
child tax credit or give them a larger
payment(s), include the amount of your
credit.
If you can use both optional methods, you
taxable CRP payment(s) in the total on
can report less than your total actual net
Farm Optional Method
line 1b. The amount of these payments is
earnings from farm and nonfarm
included in Part III, line 6, and in
You may use this method to figure your
self-employment, but you cannot report
information received from farm
net earnings from farm self-employment if
less than your actual net earnings from
partnerships showing your distributive
your gross farm income was $6,720 or
nonfarm self-employment alone.
share.
less or your net farm profits were less
If you use both methods to figure net
than $4,851. Net farm profits are the total
Lines 4a Through 4c
earnings from self-employment, you
of the amounts from Part III, line 36, and
If both lines 4a and 4c are less than $400
cannot report more than $4,480 of net
your distributive share from farm
and you have deducted CRP payments
earnings from self-employment.
partnerships — minus the amount you
on line 1b, combine lines 1a and 2.
would have entered in Part V, line 1b, had
•
Completing Your Return
If the total of lines 1a and 2 is $434 or
you not used the optional method.
more, complete Part V through line 4c.
There is no limit on how many years
Enter -0- in Part I, line 3, unless you also
Third Party Designee
you can use this method.
have church employee income. If you
If you want to allow your preparer, a
Under this method, report in Part VI,
also have church employee income (see
friend, family member, or any other
line 2, the smaller of: two-thirds of your
Church Employees earlier), also complete
person you choose to discuss your 2011
gross farm income (not less than zero), or
lines 5a and 5b and the rest of Part V, as
tax return with the IRS, check the “Yes”
$4,480. This method can increase or
appropriate.
box in the “Third Party Designee” area on
•
decrease your net self-employment farm
If the total of lines 1a and 2 is less than
page 1 of your return. Also, enter the
earnings. You can use this method even if
$434, do not complete Part V unless you
designee’s name, phone number, and
your farming business had a loss.
choose to use an optional method to
any five digits the designee chooses as
figure your SE tax or you have church
For a farm partnership, figure your
his or her personal identification number
employee income. If you have church
share of gross income based on the
(PIN).
employee income (see Church
partnership agreement. With guaranteed
If you check the “Yes” box, you (and
Employees earlier), also complete lines
payments, your share of the partnership’s
your spouse if filing a joint return) are
5a and 5b and the rest of Part V, as
gross income is your guaranteed
authorizing the IRS to call the designee to
appropriate.
payments plus your share of the gross
answer any questions that may arise
income after it is reduced by all
Line 8b
during the processing of your return. You
guaranteed payments made by the
If you received tips of $20 or more in any
are also authorizing the designee to:
partnership. If you were a limited partner,
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month and did not report the full amount
Give the IRS any information that is
include only guaranteed payments for
to your employer, you must file Form
missing from your return,
services you actually rendered to or on
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4137 with Form 1040-SS (see instructions
Call the IRS for information about the
behalf of the partnership.
for Part I, line 5, earlier). Disregard the
processing of your return or the status of
Nonfarm Optional Method
references to Form 1040 shown on Form
your refund or payment(s),
•
4137. Enter on line 8b the amount from
You may be able to use this method to
Receive copies of notices or transcripts
Form 4137, line 10.
figure your net earnings from nonfarm
related to your return, upon request, and
SS-8
Instructions for Form 1040-SS (2011)
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