Schedule SE 2021 Self-Employment Tax Instructions

• File Schedule SE if the amount on Section A, line 4, is $400 or more.
• File Schedule SE if the amount on Section B, line 4c, is $400 or more.
• File Schedule SE if you had church employee income of $108.28 or more, as defined by

the instructions.

Approved religious exemptions can affect whether the self-employment tax applies. The instructions reference approved Forms 4029 and 4361 for limited religious exemptions, and those approvals control whether covered income is exempt from SE tax.

Income Sources That Feed Schedule SE in 2021

Schedule SE uses net earnings from self-employment, and the source schedules and box codes matter. Not all income that appears on an information return is treated as self-employment income, and incorrect sourcing can result in miscalculation.

Common 2021 inputs include

• Enter the net profit or loss from Schedule C, line 31, for nonfarm sole proprietors.
• Schedule F net farm profit or loss from Schedule F, line 34, pertains to farm operations.
• Schedule K-1 (Form 1065), box 14, code A, and related self-employment codes, when

applicable, contain the partnership's self-employment earnings.

S corporation pass-through income generally is not self-employment income for Schedule SE purposes. Shareholder-employee compensation is usually reported as wages on Form W-2 and is subject to FICA, not SE tax.

Ten-Step Checklist: Schedule SE 2021

1. Step 1: Gather the Correct 2021 Records

   Collect Schedule C or Schedule F if they apply to your work during 2021. If you are a partner, collect Schedule K-1 (Form 1065) that reports self-employment earnings in box 14 using the appropriate code. Keep business records that support income and expenses to verify net profit or net loss amounts.

2. Step 2: Confirm Whether Schedule SE Filing Applies

   Review Schedule SE filing triggers before completing the form. Check whether Section A, line 4, or Section B, line 4c, reaches $400 or more. Also, confirm whether the $108.28 rule for church employee income applies to your situation, since it can require filing even when net earnings are below $400.

3. Step 3: Use the Schedule SE Flowchart to Choose a Section

   Use the flowchart printed on Schedule SE to determine whether you may use Section A or must use Section B. The flowchart controls eligibility based on specific conditions, including certain income types and election rules. Follow the flowchart results and complete the section it directs you to use.

4. Step 4: Complete Schedule C or Schedule F Before Schedule SE

   Finish Schedule C or Schedule F before starting Schedule SE. Transfer the final net profit or loss amounts from those schedules to the Schedule SE lines that request them. Keep the

   amounts consistent across schedules to avoid discrepancies that can affect both income tax and self-employment tax.

5. Step 5: Enter Partnership Self-Employment Earnings Using the Correct Box

   and Code

   If you are a partner, use Schedule K-1 (Form 1065) box 14 to identify self-employment earnings.

   Use code A for net earnings or loss from self-employment, and include other box 14 self-employment codes only when the instructions treat them as SE income. Apply partner status rules that can limit what is included, including limitations that apply to many limited partner items.

6. Step 6: Compute Net Earnings Using the 92.35 Percent Factor

   Compute net earnings from self-employment using the 92.35 percent factor shown on Schedule

   SE. This step determines the base amount subject to self-employment tax and reflects the adjustment built into the calculation. This step is part of computing the SE tax and is not the deduction for one-half of the SE tax.

7. Step 7: Apply the Social Security Wage Base and Medicare Rules

   Apply the Social Security portion of self-employment tax only up to the annual maximum amount subject to Social Security tax for 2021. Apply the Medicare portion of self-employment tax without a wage base cap. When required, complete the lines that account for Social Security wages to ensure the cap is applied correctly.

8. Step 8: Handle Additional Medicare Tax Using Form 8959

   Schedule SE computes only the regular self-employment tax. It does not compute the 0.9 percent Additional Medicare Tax. If your income exceeds the Additional Medicare Tax thresholds, complete Form 8959 using the self-employment income and wage amounts required by that form, and follow its instructions for carrying the result to the return.

9. Step 9: Transfer SE Tax and the Half-SE-Tax Deduction to the Correct

   Forms

   Enter self-employment tax from Schedule SE on Schedule 2 (Form 1040), line 4 for 2021.

   Include that amount in the total tax on Form 1040, or Form 1040-SR, line 23, through the

   Schedule 2 total. Enter the deduction for one-half of self-employment tax from Schedule SE on

   Schedule 1 (Form 1040), line 15, and allow it to flow into adjusted gross income.

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10. Step 10: Address Clergy, Nonresident Alien Rules, and Assembly

    Requirements

    If you are clergy, include housing allowance or the rental value of a home, including utilities, in net earnings for SE tax when the rules require inclusion. Ministers generally pay SE tax on ministerial earnings unless an approved exemption applies. Nonresident aliens generally are not subject to SE tax unless an international social security agreement determines U.S. coverage.

    For paper filing, place Form 1040 on top, and attach schedules and forms behind it in the order they appear in the attachment sequence. Keep Schedule K-1 statements for your records unless instructions require attachment.

    Clergy and Church Employee Notes That Affect Schedule

    SE

    Clergy treatment differs from typical employee treatment for income tax purposes. Ministers often include housing-related amounts in net earnings for SE tax, which increases the SE tax base. Approved exemptions, when granted, determine whether SE tax applies to covered ministerial earnings.

    Church employee income uses a separate filing trigger that applies at $108.28. This rule applies in defined situations involving a church or a qualified church-controlled organization that elected an exemption from employer Social Security and Medicare taxes. The Schedule SE instructions define when this rule applies and how income is treated.

    Nonresident Alien Coverage Determinations

    Nonresident alien treatment for self-employment tax depends on coverage determinations under international social security agreements. A self-employed nonresident alien living in the United

    States pays SE tax only when the applicable agreement results in coverage under the U.S.

    system. When coverage applies, the taxpayer completes Schedule SE and files it with Form

    1040NR as instructed.

    Significant Reminders for Schedule SE 2021

    Schedule SE retained its standard structure for 2021. Accuracy depends on the correct sourcing of income, the correct application of thresholds, and the correct placement of amounts on

    Schedule 1 and Schedule 2. Using the flowchart, the proper box codes, and the correct carry lines ensures the self-employment tax calculation aligns with the 2021 Form 1040 design.

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