Schedule SE (2018): Self-Employment Tax Review

Step 1: Gather Required Income Documents

Collect all Forms W-2 showing wages, salaries, and tips. Obtain Forms 1099-R for
distributions from IRAs, pensions, and annuities. Retrieve Forms 1099-G for
unemployment compensation and state tax refunds, and Forms 1099-MISC if
applicable.

Gather Schedule K-1 forms from partnerships, S corporations, estates, or trusts. If you
enrolled in ACA Marketplace coverage, obtain Form 1095-A. Collect any other income
statements showing taxable income for 2018.

For 2018, claiming the child tax credit or credit for other dependents requires the
dependent to have a valid Social Security number issued before the return’s due date,
including extensions.

Step 2: Calculate Total Income and Identify Adjustments

Report wages on line 1, taxable interest on line 2b, and qualified and ordinary dividends
on lines 3a and 3b. Enter taxable distributions from IRAs and pensions on line 4b.

Report taxable Social Security benefits on line 5b.

Add lines 1 through 5 and any Schedule 1, line 22 amount to reach line 6, which
represents your total income. For 2018, identify adjustments to income, including
educator expenses, student loan interest, the deductible portion of self-employment tax,
and excess deduction from estate or trust termination under IRC Section 67(e). Report
these adjustments on Schedule 1, line 36.

Subtract Schedule 1, line 36, from line 6 to calculate line 7, your adjusted gross income.

Step 3: Determine Standard Deduction or Itemize on Schedule A

For 2018, your standard deduction depends on your filing status. Single filers receive
$12,000. Married filing jointly receives $24,000. Head of household filers receive
$18,000. Married filing separately: $12,000, but if one spouse itemizes deductions, the
other spouse filing separately cannot claim the standard deduction and must also
itemize. If you are age 65 or older or blind, add the applicable additional deduction
amount to your standard deduction.

If you itemize deductions on Schedule A, note that the state and local tax deduction is
capped at a combined $10,000 for 2018, or $5,000 if married filing separately.

Miscellaneous itemized deductions, subject to the 2% AGI floor, are eliminated.

AGI-based itemized deductions are no longer subject to the general restriction. Enter
the standard deduction amount or Schedule A total on line 8.

Step 4: Calculate Qualified Business Income Deduction

If you have qualified business income from a sole proprietorship, partnership, S
corporation, trust, or estate, you may deduct up to 20% of that income on line 9. This
deduction does not apply to wage income as an employee or income from a C
corporation.

For 2018, the deduction calculation involves comparing two amounts. The first is your
combined qualified business income component, which may be limited by W-2 wages
paid and the unadjusted basis of qualified property if your taxable income exceeds

certain thresholds. The second amount is 20% of your taxable income minus net capital
gain. Your deduction is the lesser of these two amounts.

For taxpayers with taxable income below $157,500 for single filers or head of
household, or $315,000 for married filing jointly, the qualified business income
component is generally 20% of qualified business income. Above these thresholds,
additional limitations apply based on W-2 wages and qualified property—complete Form
8995 or Form 8995-A to calculate this deduction and attach the form to your return.

Step 5: Calculate Taxable Income and Tax Liability

Subtract line 8, your standard or itemized deduction, and line 9, your qualified business
income deduction, from line 7, your adjusted gross income. The result is line 10, your
taxable income. If the result is zero or less, enter zero.

On line 11a, calculate your tax using the 2018 tax tables or tax computation worksheet.

Tax rates for 2018 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

If you must include income from a child’s unearned income using Form 8814, tax on
lump-sum distributions using Form 4972, or other special tax items, complete the
appropriate forms and add those amounts to line 11. On line 11b, add any tax from
Schedule 2.

Step 6: Claim Credits on Form 1040

On line 12a, claim the child tax credit with a maximum of $2,000 per qualifying child
under age 17 who has a valid Social Security number. Complete Schedule 8812 if you
qualify for the additional child tax credit.

A qualifying child must be your dependent, under the age of 17 at the end of 2018, meet
the relationship, residency, and support tests, and have a required Social Security
number.

For dependents who do not qualify for the child tax credit, claim the credit for other
dependents with a maximum of $500 per dependent on line 12a or by completing the
child tax credit worksheet.

Add any amount from Schedule 3 on line 12b, including education credits, energy
credits, foreign tax credit, child and dependent care credit, retirement savings
contributions credit, and premium tax credit.

Step 7: Account for Other Taxes and Adjustments

On line 13, subtract line 12, your total credits, from line 11, your tax. If the result is zero
or less, enter zero.

On line 14, report other taxes from Schedule 4. These include self-employment tax,
household employment tax, additional Medicare tax, additional tax on IRAs or other
qualified retirement plans, alternative minimum tax, Section 965 net tax liability
installment, and health care individual responsibility payment through 2018.

On line 15, add lines 13 and 14 to arrive at your total tax.

Step 8: Report Tax Payments and Withholding

On line 16, enter federal income tax withheld from Forms W-2, box 2, Forms 1099-R,
box 4, and Forms 1099-G, if applicable.

On line 17a, claim the earned income credit if eligible. On line 17b, claim the additional
child tax credit from Schedule 8812. On line 17c, report credits from Schedule 5. Add
lines 16 and 17 to calculate total payments on line 18.

For 2018, if you had health coverage for all months of the year through an employer,
government program, individual market plan, or qualified exemption, check the full-year
health care coverage or exempt box on the front of Form 1040. If not, complete Form
8965 to calculate any shared responsibility payment due and include that amount on
Schedule 4, line 61.

Step 9: Calculate Refund or Amount Owed

On line 19, compare line 18, your total payments, to line 15, your total tax. If line 18
exceeds line 15, line 19 is your overpayment.

You may elect to have the overpayment refunded on line 20a or applied to your 2019
estimated tax on line 21. If line 15 exceeds line 18, line 22 shows the amount you owe.

Payment methods appear in the Form 1040 instructions.

On line 23, calculate any estimated tax penalty if required by following the instructions.

Step 10: Sign, Assemble, and Prepare for Mailing

Sign and date Form 1040 using a pen. If filing jointly, both spouses must sign the return.

If the IRS assigned you an Identity Protection PIN, enter it in the designated box.

Attach all required forms and schedules in the following order: Form 1040 pages 1 and
2, Schedule 1 if you have additional income or adjustments, Schedule 2 if other taxes

apply, Schedule 3 if additional credits apply, Schedule 4 if other taxes apply, Schedule 5
if other payments or refundable credits apply, Schedule A if itemizing, Schedule B if you
have interest or dividend income exceeding $1,500, Schedule C if self-employed,
Schedule D if you have capital gains or losses, Schedule E if you have rental or
partnership income, Schedule H if you employ household workers, and Schedule SE if
you have self-employment income of $400 or more.

Attach Form W-2, copy B, all pages. Attach Form 1099-R or other relevant 1099 forms if
tax was withheld. Attach Form 1095-A if applicable for premium tax credit reconciliation
on Form 8962. Include any other required schedules or forms such as Forms 8962,
8995 or 8995-A, 8814, 4972, 8919, 5329, 6251 for alternative minimum tax, or 965-A for
Section 965.

For 2018 paper filers, mail the return to the address listed in the Form 1040 instructions
or on the IRS Where to File page for the current year.

Key Form 1040 (2018) Limitations
Nonresident aliens must file Form 1040-NR and cannot claim the standard deduction
unless they elect to be treated as a resident alien for tax purposes with specific
conditions, including marriage to a U.S. citizen or resident alien.

Taxpayers filing married filing separately cannot claim the standard deduction if their
spouse itemizes deductions. Persons who are nonresident aliens, dual-status aliens
except those meeting specific requirements, or filing a return for a period of less than 12
months cannot claim the standard deduction.

The qualified business income deduction under Section 199A does not apply to income
earned as an employee through W-2 wages or through a C corporation. The deduction
does not apply to specified service trade or business income for higher-income
taxpayers.

Compliance Notes for 2018 Form 1040
The form must be signed under penalties of perjury with the declaration that you have
examined this return and accompanying schedules and statements. To the best of your
knowledge and belief, they are true, correct, and complete.

If a paid preparer completes part of the return, the preparer’s declaration must be based
on all information of which the preparer knows.

If the IRS issued an Identity Protection PIN to you, you must enter it in the designated
box on the Form 1040 signature line. An incorrect or missing PIN may result in rejection
for e-filing or a delay for paper filing.

A taxpayer filing Form 1040 for 2018 cannot claim a personal exemption deduction for
any person, including themselves, their spouse, or their dependents. All dependent
Social Security numbers reported on the form must be valid for employment and issued
before the return’s due date, including extensions, to claim the child tax credit or
additional child tax credit.

If you’re missing tax documents or want to ensure the numbers you enter match IRS records,
we can help.

If you’re missing tax documents or want to ensure the numbers you enter match IRS records,
we can help.