Instructions For Schedule Se (Form 1040) - 2011 Page 5
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5Changing Your Method
employee social security wages and tips
•
Schedule C (Form 1040), line 31,
from Form W-2 on line 8a.
•
You can change the method after you file
Schedule C-EZ (Form 1040), line 3,
Optional Methods
your return. That is, you can change from
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Schedule K-1 (Form 1065), box 14,
the regular to the optional method or from
code A (from other than farm partnerships),
the optional to the regular method. To do
How Can the Optional Methods
and
this, file Form 1040X.
Help You
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Schedule K-1 (Form 1065-B),
Farm Optional Method
box 9, code J1.
Social security coverage.
The optional
methods may give you credit toward your
You may use this method to figure your net
To use this method, you also must be
social security coverage even though you
earnings from farm self-employment if
regularly self-employed. You meet this re-
have a loss or a small amount of income
your gross farm income was $6,720 or less
quirement if your actual net earnings from
from self-employment.
or your net farm profits were less than
self-employment were $400 or more in 2 of
$4,851. Net farm profits are:
the 3 years preceding the year you use the
Using the op-
Earned income credit (EIC).
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nonfarm optional method. The net earnings
The total of the amounts from Sched-
tional methods may qualify you to claim
of $400 or more could be from either farm
ule F (Form 1040), line 34, and Schedule
the EIC or give you a larger credit if your
or nonfarm earnings or both. The net earn-
K-1 (Form 1065), box 14, code A, minus
net earnings from self-employment (deter-
ings include your distributive share of part-
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mined without using the optional methods)
The amount you would have entered
nership income or loss subject to SE tax.
are less than $4,480. Figure the EIC with
on Schedule SE, line 1b, had you not used
and without using the optional methods to
Use of the nonfarm optional method
the optional method.
see if the optional methods will benefit you.
from nonfarm self-employment is limited
There is no limit on how many years
to 5 years. The 5 years do not have to be
Additional child tax credit.
Using the op-
you can use this method.
consecutive.
tional methods may qualify you to claim
Under this method, report in Part II, line
Under this method, report in Part II, line
the additional child tax credit or give you a
15, two-thirds of your gross farm income,
17, two-thirds of your gross nonfarm in-
larger credit if your net earnings from
up to $4,480, as your net earnings. This
come, up to the amount on line 16, as your
self-employment (determined without us-
method can increase or decrease your net
net earnings. But you cannot report less
ing the optional methods) are less than
earnings from farm self-employment even
than your actual net earnings from nonfarm
$4,480. Figure the additional child tax
if the farming business had a loss.
self-employment.
credit with and without using the optional
For a farm partnership, figure your share
methods to see if the optional methods will
Figure your share of gross income from
of gross income based on the partnership
benefit you.
a nonfarm partnership in the same manner
agreement. With guaranteed payments,
as a farm partnership. See Farm Optional
Child and dependent care credit.
The op-
your share of the partnership’s gross in-
Method for details.
tional methods may help you qualify for
come is your guaranteed payments plus
this credit or give you a larger credit if your
Using Both Optional Methods
your share of the gross income after it is
net earnings from self-employment (deter-
reduced by all guaranteed payments made
If you can use both methods, you can report
mined without using the optional methods)
by the partnership. If you were a limited
less than your total actual net earnings from
are less than $4,480. Figure this credit with
partner, include only guaranteed payments
farm and nonfarm self-employment, but
and without using the optional methods to
for services you actually rendered to or on
you cannot report less than your actual net
see if the optional methods will benefit you.
behalf of the partnership.
earnings from nonfarm self-employment
Self-employed health insurance deduction.
Nonfarm Optional Method
alone.
The optional methods of computing net
If you use both methods to figure net
You may be able to use this method to fig-
earnings from self-employment may be
earnings, you cannot report more than
ure your net earnings from nonfarm
used to figure your self-employed health
$4,480 of net earnings from self-employ-
self-employment if your net nonfarm prof-
insurance deduction.
ment.
its were less than $4,851 and also less than
Using the optional methods
72.189% of your gross nonfarm income.
may give you the benefits de-
Net nonfarm profits are the total of the
scribed above, but they may
amounts from:
also increase your SE tax.
SE-5
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