What IRS Schedule SE (Form 1040) (2019) Is For
IRS Schedule SE (Form 1040) (2019) is the official tax form used by self-employed individuals, freelancers, and small business owners to calculate their self-employment tax. This tax represents the combined Social Security and Medicare contributions that employees normally have withheld from their wages. When you are self-employed, you must pay both the employer and employee portions of these taxes to ensure your earnings count toward Social Security retirement, disability, and Medicare benefits.
For a deeper dive into understanding self-employment tax and calculation tips, see our detailed guide on the subject.
When You’d Use IRS Schedule SE (Form 1040) (2019)
You will need to file this form whenever your self-employment income meets certain conditions or your tax situation requires special reporting:
- Self-Employment Income of $400 or More: You must file Schedule SE if your net earnings from self-employment were $400 or more during the 2019 tax year.
- Church Employee Income of $108.28 or More: If you had church employee income above $108.28, you must also pay self-employment tax using this form to meet Social Security and Medicare requirements.
- Late or Amended Tax Returns: When filing a late or amended individual income tax return for 2019, you should include Schedule SE to report self-employment contributions and ensure an accurate tax assessment.
- Combination of W-2 Wages and Self-Employment Earnings: Self-employed individuals who also earn wages must carefully figure their net earnings to avoid overpaying Social Security tax or underreporting their taxable income.
- Exceptional Circumstances for Ministers and Religious Workers: Certain church employees or ministers who are considered self-employed may also be required to complete Schedule SE to pay their applicable self-employment tax.
If you’re a small business owner looking for payroll tax relief options, check out our step-by-step guide.
Key Rules or Details for the 2019 Tax Year
Several key details apply when filing IRS Schedule SE (Form 1040) (2019) to calculate your self-employment tax obligations accurately:
- Earnings Threshold: You are required to file Schedule SE if your net earnings from self-employment were $400 or more during the 2019 tax year.
- Social Security Wage Base: The maximum amount of income subject to the Social Security portion of self-employment tax was $132,900 for 2019; earnings above this limit were only subject to Medicare taxes.
- Self-Employment Tax Rate: The combined self-employment tax rate was 15.3 percent, which included 12.4 percent for Social Security and 2.9 percent for Medicare contributions.
- Deduction for Half the Tax: You can deduct half of your self-employment tax as a deductible expense on Form 1040 to reduce your adjusted gross income.
- Additional Medicare Tax: If your total income exceeded certain thresholds, you may have been subject to an additional 0.9 percent Medicare tax on the excess amount.
- Form Versions: Use the Short Schedule SE if your filing is straightforward, or the Long Schedule SE if you have complex income situations or high earnings subject to self-employment tax.
Learn how IRS account transcripts show missed or late payments and how this may affect your self-employment tax filings.
Step-by-Step (High Level)
Completing IRS Schedule SE (Form 1040) (2019) requires organized recordkeeping and accurate calculations to determine your total self-employment tax:
- Gather Financial Information: Collect your Schedule C (business income), Schedule F (farm income), or partnership statements to calculate your total self-employment income for the year.
- Determine Which Schedule SE to Use: Choose between the Short Schedule SE or the Long Schedule SE depending on your total self-employment income, any wages earned, or special reporting requirements.
- Calculate Net Earnings: Multiply your net profit by 92.35 percent to determine your net earnings from self-employment that are subject to Social Security and Medicare taxes.
- Apply the Self-Employment Tax Rate: Multiply your calculated earnings by 15.3 percent to determine your total SE tax due, including both employer and employee portions.
- Transfer Results to Form 1040: Record your self-employment tax on Schedule 2 (Form 1040) and claim your deduction for half of that amount on Schedule 1 to lower your income tax.
- Maintain Proper Documentation: Keep receipts, invoices, and bank statements for at least three years to verify your income and deductible expenses in the event of an IRS review.
You can find more information about reporting your self-employment tax with the IRS Form 1040 instructions.
Common Mistakes and How to Avoid Them
Self-employed individuals often make preventable errors when filing IRS Schedule SE (Form 1040) (2019); understanding these mistakes can help you avoid additional tax liability and processing delays:
- Reporting Gross Income Instead of Net Profit: You must calculate your net profit by subtracting deductible expenses from your business income before entering it on Schedule SE to determine your actual taxable amount.
- Forgetting to Deduct Half the Self-Employment Tax: Claim the deduction for half of your self-employment tax on Schedule 1 of Form 1040 to lower your adjusted gross income and reduce your overall tax burden.
- Combining Multiple Businesses Incorrectly: When operating more than one business, you should combine all profits and losses on a single Schedule SE instead of filing separate forms.
- Ignoring W-2 Income Interaction: If you also receive wages, ensure that your total Social Security contributions do not exceed the maximum amount subject to self-employment tax.
- Missing Optional Methods: Use optional methods when you experience a net loss or low income so you can still earn Social Security coverage and maintain eligibility for credits such as the earned income credit.
- Paying Estimated Taxes Late: You should pay quarterly estimated taxes on time to avoid penalties and ensure that you meet your self-employment tax obligations throughout the year.
It's a good idea to review our checklist of documents to keep for tax records to help ensure compliance.
What Happens After You File IRS Schedule SE (Form 1040) (2019)
After you file your Form 1040 with Schedule SE attached, the IRS processes your income and self-employment tax together. The information reported on Schedule SE is sent to the Social Security Administration to update your earnings record, which affects your eligibility for Social Security retirement and disability benefits. Paying self-employment tax ensures that you receive credit toward both Social Security and Medicare coverage. Self-employed individuals should regularly review their Social Security statements to confirm that all reported earnings from self-employment are accurately recorded.
FAQs
Do I need to file Schedule SE if my self-employment income is below $400?
You are not required to file Schedule SE if your net earnings from self-employment are below $400. However, you may still choose to file using optional methods to earn Social Security credits or qualify for benefits such as the earned income credit.
What if I already receive Social Security benefits?
You must continue to pay self-employment tax on any new earnings from self-employment even if you already receive Social Security benefits. Additional income can increase your future benefit amount if it exceeds your earlier average earnings.
How do I know which Schedule SE version to use?
Use the Short Schedule SE if your total self-employment income is simple and below the Social Security wage limit. Use the Long Schedule SE if your income is higher, includes W-2 wages, or requires special reporting.
Can I deduct health insurance premiums on Schedule SE?
You cannot deduct health insurance premiums directly on Schedule SE. Instead, report them on Schedule 1 of Form 1040 to reduce your income tax liability, but they will not lower your self-employment tax.
