Instructions For Schedule Se Form 1040 - 2016 Page 6
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6Optional Methods
Changing Your Method
less than 72.189% of your gross non-
farm income. Net nonfarm profits are
How the Optional Methods Can
You can change the method used to fig-
the total of the amounts from:
ure your net earnings from self employ-
Help You
Schedule C (Form 1040), line 31,
ment after you file your return. That is,
Schedule
C-EZ
(Form
1040),
Social security coverage. The optional
you can change from the regular to the
line 3,
methods may give you credit toward
optional method or from the optional to
Schedule
K-1
(Form
1065),
your social security coverage even
the regular method. To do this, file Form
box 14, code A (from other than farm
though you have a loss or a small
1040X.
partnerships), and
amount of income from self-employ-
Schedule K-1 (Form 1065-B),
Farm Optional Method
ment.
box 9, code J1.
Earned income credit (EIC). Using
You may use this method to figure your
To use this method, you also must be
the optional methods may qualify you to
net earnings from farm self-employment
regularly self-employed. You meet this
claim the EIC or give you a larger credit
if your gross farm income was $7,560 or
requirement if your actual net earnings
if your net earnings from self-employ-
less or your net farm profits were less
from self-employment were $400 or
ment (determined without using the op-
than $5,457. Net farm profits are:
more in 2 of the 3 years before the year
tional methods) are less than $5,040.
The total of the amounts from
you use the nonfarm optional method.
Figure the EIC with and without using
Schedule F (Form 1040), line 34, and
The net earnings of $400 or more could
the optional methods to see if the op-
Schedule K-1 (Form 1065), box 14,
be from either farm or nonfarm earnings
tional methods will benefit you.
code A, minus
or both. The net earnings include your
Additional child tax credit. Using the
The amount you would have en-
distributive share of partnership income
optional methods may qualify you to
tered on Schedule SE, line 1b, had you
or loss subject to SE tax.
claim the additional child tax credit or
not used the optional method.
You can use the nonfarm optional
give you a larger credit if your net earn-
There is no limit on how many years
method to figure your earnings from self
ings from self-employment (determined
you can use this method.
employment for only 5 years. The 5
without using the optional methods) are
Under this method, report in Part II,
years do not have to be consecutive.
less than $5,040. Figure the additional
line 15, two-thirds of your gross farm in-
Under this method, report in Part II,
child tax credit with and without using
come, up to $5,040, as your net earn-
line 17, two-thirds of your gross non-
the optional methods to see if the op-
ings. This method can increase or de-
farm income, up to the amount on
tional methods will benefit you.
crease your net earnings from farm
line 16, as your net earnings. But you
Child and dependent care credit. The
self-employment even if the farming
can’t report less than your actual net
optional methods may help you qualify
business had a loss.
earnings from nonfarm self-employ-
for this credit or give you a larger credit
For a farm partnership, figure your
ment.
if your net earnings from self-employ-
share of gross income based on the part-
Figure your share of gross income
ment (determined without using the op-
nership agreement. With guaranteed
from a nonfarm partnership in the same
tional methods) are less than $5,040.
payments, your share of the partnership's
manner as a farm partnership. See
Farm
Figure this credit with and without using
gross income is your guaranteed pay-
Optional Method
for details.
the optional methods to see if the op-
ments plus your share of the gross in-
tional methods will benefit you.
come after it is reduced by all guaran-
Using Both Optional Methods
Selfemployed health insurance de
teed payments made by the partnership.
duction. The optional methods of com-
If you can use both methods, you can re-
If you were a limited partner, include
puting net earnings from self-employ-
port less than your total actual net earn-
only guaranteed payments for services
ment may be used to figure your
ings from farm and nonfarm self-em-
you actually rendered to or on behalf of
self-employed health insurance deduc-
ployment, but you can’t report less than
the partnership.
tion.
your actual net earnings from nonfarm
Nonfarm Optional Method
self-employment alone.
Using the optional methods
!
If you use both methods to figure net
may give you the benefits de-
You may be able to use this method to
earnings, you can’t report more than
scribed above, but they may al-
figure your net earnings from nonfarm
CAUTION
$5,040 of net earnings from self-em-
so increase your SE tax.
self-employment if your net nonfarm
ployment.
profits were less than $5,457 and also
SE-6
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