Instructions for Schedule SE 2020 Checklist
What Schedule SE Covers for Tax Year 2020
Schedule SE for tax year 2020 calculates self-employment tax on net earnings from self-employment. The schedule can include net farm profit from Schedule F and other farm-related items only when the self-employment rules treat them as net earnings. The form also covers certain partnership self-employment earnings and certain church employee situations described in the instructions.
Form 1040 for 2020 includes the Recovery Rebate Credit on line 30, and Economic Impact
Payments were advance payments of that credit. Schedule SE does not calculate the Recovery
Rebate Credit, and it does not receive a line entry from that credit. Your net earnings can still affect income-based items you calculate elsewhere, including the Earned Income Tax Credit.
Filing Triggers You Must Check Before You Start
Schedule SE filing depends on the Schedule SE thresholds and the specific filing triggers described in the instructions. You file based on amounts that appear on the schedule’s own lines for net earnings. You also file when the church employee rule applies at the separate lower threshold.
Use these 2020 filing triggers
- Schedule SE must be filed if the amount on line 4 of the Short Schedule SE is $400 or
more.
- Schedule SE must be filed if the amount on line 4c of the Long Schedule SE is $400 or
more.
- Schedule SE must be filed if church employee income of $108.28 or more was received,
as defined in the Schedule SE instructions.
Income Sources Schedule SE Uses in 2020
Schedule SE uses net earnings from self-employment, and the source schedule and box codes matter. Schedule C and Schedule F often provide the core net profit or net loss amounts.
Partnership self-employment earnings often come from a partnership Schedule K-1, and you must use the partnership version and the correct box and code.
Use these common inputs
- Schedule F, line 34, reports net farm profit or loss, which flows to Schedule SE, line 1a.
- Schedule C, line 31, reports net profit or loss, which flows to Schedule SE, line 2.
- Schedule K-1 (Form 1065), box 14, code A, reports partnership net earnings or loss from
self-employment when provided.
- Forms 1099-NEC and 1099-MISC report business receipts used to prepare Schedule C
or Schedule F.
S corporation pass-through income generally is not self-employment income for Schedule SE purposes. Shareholder-employee compensation is generally handled as wages through payroll reporting and employment taxes.
Ten-Step Checklist
Step 1: Gather the Correct 2020 Documents
Collect Schedule C, Schedule F, and any partnership Schedule K-1 (Form 1065) you need to report self-employment earnings. Collect Forms 1099-NEC and 1099-MISC that support the business receipts you reported on your schedules. Keep your supporting records available so you can confirm the net profit or net loss amounts you enter.
Step 2: Confirm That Schedule SE Filing Applies
Check whether you meet the Schedule SE filing triggers before you complete the form. You file when Short Schedule SE line 4 or Long Schedule SE line 4c is $400 or more. You also file when you had church employee income of $108.28 or more under the church employee rule.
Step 3: Use the Schedule SE Flowchart to Choose Short or Long
Use the flowchart on Schedule SE to determine whether you may use the short section or must use the long section. The flowchart routes you based on the conditions listed on the form.
Follow the flowchart's route and complete that section.
Step 4: Enter Farm Profit and Business Profit on the Correct Lines
Enter net farm profit or loss from Schedule F line 34 on Schedule SE line 1a. Enter net profit or loss from Schedule C line 31 on Schedule SE line 2. If you have both farm and nonfarm self-employment earnings, you include each on the line that matches its source.
Step 5: Include Partnership Self-Employment Earnings Using the Correct
K-1 Box and Code
If you are a partner, use Schedule K-1 (Form 1065), box 14, code A, to report net earnings or loss from self-employment. Enter partnership self-employment earnings into Schedule SE as the form instructs for partnership income. Apply the partner limitations described in the instructions, including special limitations that can apply to certain partners.
Step 6: Compute Net Earnings and Apply the 92.35 Percent Factor
Compute net earnings using the Schedule SE computation lines that apply to your section. The schedule applies a 92.35 percent factor to net profit or loss in the computation of the SE tax.
This step is part of calculating SE tax and is not a deduction for one-half of SE tax.
Step 7: Compute the Social Security Portion and the Medicare Portion
Correctly
Compute self-employment tax using the Schedule SE lines that separate the Social Security portion and the Medicare portion. Apply the Social Security wage base limit using the wages and net earnings lines the form provides when the section you use requires them. Apply the
Medicare portion as scheduled, since Medicare does not use the Social Security wage base cap.
Step 8: Transfer Self-Employment Tax to Schedule 2, Not to Form 1040
Directly
Transfer self-employment tax from Schedule SE line 12 to Schedule 2 (Form 1040) line 4. The total from Schedule 2 is reported on Form 1040 as “other taxes” through the Schedule 2 total line. This step carries the tax amount but does not carry a net earnings amount or a business loss amount.
Step 9: Transfer the Deduction for One-Half of SE Tax to Schedule 1
Transfer the deduction for one-half of self-employment tax from Schedule SE line 13 to
Schedule 1 (Form 1040) line 14. Schedule 1 then carries the total adjustments to income to
Form 1040 through the Schedule 1 total adjustments line. This deduction is an adjustment to income, and it does not reduce self-employment tax.
- Your name and identifying number must be written on each attached page when
- Schedules and forms must be attached behind Form 1040 in the order described in the
- W-2 forms and other required statements must be attached when the instructions
- K-1 forms and other supporting documents should be kept for your records unless the
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Complete Part III Deferral Items When They Apply and Assemble
the Return
For 2020, Schedule SE includes Part III for maximum deferral of self-employment tax payments.
Line 18 represents the portion of line 3 that is attributable to March 27 through December 31.
2020, and the remaining Part III lines follow from that split. Assemble a paper return with Form
1040 on top and attach schedules and forms behind it using the Form 1040 instructions.
Paper Filing Assembly and Signature Rules
If you file by paper, place Form 1040 on top and attach schedules and forms behind it, as directed in the Form 1040 instructions. You sign and date Form 1040 in the “Sign Here” area, and you do not sign Schedule SE separately. Schedules typically do not include signature lines, and the return signature serves as the filing.
Use this paper-filing checklist for finishing steps: required. instructions. indicate they are required. instructions require attachment.
Nonresident Alien Rules
Nonresident aliens are generally not subject to self-employment tax. A self-employed nonresident alien living in the United States may owe self-employment tax only when an international social security agreement determines coverage under the U.S. system. When self-employment income is subject to SE tax under that coverage rule, the taxpayer completes
Schedule SE and files it with Form 1040-NR.
How Losses Affect Schedule SE in 2020
Losses can affect the self-employment tax by reducing net earnings from self-employment. A loss from one self-employment business can reduce net earnings from another self-employment business when you combine them for net earnings. If total net earnings fall below $400, you generally do not owe self-employment tax, while the church employee rule can still trigger filing at $108.28.
Schedule SE 2020 Line Changes You Must Handle
Correctly
Schedule SE for 2020 added Part III, which addresses the maximum deferral of self-employment tax payments. Part III includes line 18, which is not considered “net self-employment income” and does not carry over to Schedule 2 as a loss item.
Self-employment tax still carries from Schedule SE line 12 to Schedule 2 line 4, and the deduction still carries from Schedule SE line 13 to Schedule 1 line 14.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
