Instructions For Schedule Se (Form 1040) - 2007 (Page 4 of 4) in pdf

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gibility for the payment depended on length

used to figure your self-employed health

Schedule C-EZ (Form 1040), line 3,

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of service).

insurance deduction.

Schedule K-1 (Form 1065), box 14,

code A (from other than farm partnerships),

Using the optional methods

Statutory Employee Income

and

may give you the benefits de-

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Schedule K-1 (Form 1065-B),

scribed above, but they may

If you were required to check the box on

box 9, code J1.

also increase your SE tax.

Schedule C or C-EZ, line 1, because you

were a statutory employee, do not include

To use this method, you also must be

Farm Optional Method

the net profit or (loss) from that Schedule

regularly self-employed. You meet this re-

C, line 31 (or the net profit from Schedule

You may use this method to figure your net

quirement if your actual net earnings from

C-EZ, line 3), on Short or Long Schedule

earnings from farm self-employment if

self-employment were $400 or more in 2 of

SE, line 2. But if you file Long Schedule

your gross farm income was $2,400 or less

the 3 years preceding the year you use the

SE, be sure to include statutory employee

or your net farm profits were less than

nonfarm optional method. The net earnings

social security wages and tips from Form

$1,733. Net farm profits are the total of the

of $400 or more could be from either farm

W-2 on line 8a.

amounts from:

or nonfarm earnings or both. The net earn-

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ings include your distributive share of part-

Schedule F (Form 1040), line 36, and

Optional Methods

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nership income or loss subject to SE tax.

Schedule K-1 (Form 1065), box 14,

Use of the nonfarm optional method

How Can the Optional Methods

code A (from farm partnerships).

from nonfarm self-employment is limited

Help You?

There is no limit on how many years

to 5 years. The 5 years do not have to be

you can use this method.

Social security coverage.

The optional

consecutive.

methods may give you credit toward your

Under this method, report on Part II,

social security coverage even though you

line 15, two-thirds of your gross farm in-

line 17, two-thirds of your gross nonfarm

have a loss or a small amount of income

come, up to $1,600, as your net earnings.

income, up to $1,600, as your net earnings.

from self-employment.

This method can increase or decrease your

But you cannot report less than your actual

net earnings from farm self-employment

Using the op-

Earned income credit (EIC).

net earnings from nonfarm self-employ-

even if the farming business had a loss.

tional methods may qualify you to claim

ment.

You can change the method after you

the EIC or give you a larger credit if your

You can change the method after you

net earnings from self-employment (deter-

file your return. That is, you can change

from the regular to the optional method or

mined without using the optional methods)

from the regular to the optional method or

from the optional to the regular method. To

are less than $1,600. Figure the EIC with

from the optional to the regular method. To

and without using the optional methods to

do this, file Form 1040X.

do so, file Form 1040X.

see if the optional methods will benefit you.

For a farm partnership, figure your share

Figure your share of gross income from

of gross income based on the partnership

Additional child tax credit.

Using the op-

a nonfarm partnership in the same manner

agreement. With guaranteed payments,

tional methods may qualify you to claim

as a farm partnership. See Farm Optional

your share of the partnership’s gross in-

the additional child tax credit or give you a

Method on this page for details.

come is your guaranteed payments plus

larger credit if your net earnings from

your share of the gross income after it is

Using Both Optional

self-employment (determined without us-

reduced by all guaranteed payments made

ing the optional methods) are less than

Methods

by the partnership. If you were a limited

$1,600. Figure the additional child tax

partner, include only guaranteed payments

If you can use both methods, you can report

credit with and without using the optional

for services you actually rendered to or on

less than your total actual net earnings from

methods to see if the optional methods will

behalf of the partnership.

farm and nonfarm self-employment, but

benefit you.

you cannot report less than your actual net

Nonfarm Optional Method

Child and dependent care credit.

The op-

earnings from nonfarm self-employment

tional methods may help you qualify for

alone.

You may be able to use this method to fig-

this credit or give you a larger credit if your

ure your net earnings from nonfarm

If you use both methods to figure net

net earnings from self-employment (deter-

self-employment if your net nonfarm prof-

earnings, you cannot report more than

mined without using the optional methods)

its were less than $1,733 and also less than

$1,600 of net earnings from self-employ-

are less than $1,600. Figure this credit with

72.189% of your gross nonfarm income.

ment.

and without using the optional methods to

Net nonfarm profits are the total of the

see if the optional methods will benefit you.

amounts from:

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Self-employed health insurance deduction.

Schedule C (Form 1040), line 31,

The optional methods of computing net

earnings from self-employment may be

SE-4

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Instructions For Schedule Se (Form 1040) - 2007 Page 4

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