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The Hows of Taxes

Module 14: Self-Employment Income and the Self-Employment Tax

 

A man using a computer in a business setting.
A business is a continuous, regular activity that has income or profit as its primary purpose. Independent contractors are self-employed. Self-employed workers control the methods and means of performing services for others. In contrast, employers direct or control the work of their employees. Self-employment profit is self-employment income minus self-employment expenses when self-employment income is greater than self-employment expenses. Self-employment profit increases the income that is subject to tax. Self-employment loss is self-employment income minus self-employment expenses when self-employment income is less than self-employment expenses. Self-employment tax is similar to Social Security and Medicare taxes. The self-employment tax rate in 2014 is 15.3 percent of self-employment profit. The self-employment tax increases the total tax. An adjustment to income of one-half of a taxpayer's self-employment tax decreases the income that is subject to income tax.

materials:

Tax Tutorial
Tax Tutorial: Self-Employment Income and the Self-Employment TaxDiscover how to report self-employment income, expenses, and profits as well as the self-employment tax.
Fact Sheet
Fact Sheet: Self-Employment Income and the Self-Employment TaxPrint this fact sheet on self-employment income and the self-employment tax.
Simulation
Simulation 14A and 14B: Using Form 1099-INT and 1099-MSC to Complete Schedule C-EZ, Schedule SE, and Form 1040Help Rita Bentley, who has a pet sitting service, report her self-employment and interest income in order to file her Form 1040. Help James King, a teenage lawn care provider, report his self-employment income in order to file his Form 1040.
Assessment
Assessment: Employment Income and the Self-Employment TaxReview your understanding of self-employment income and the self-employment tax.
skill check:
Check your understanding of self-employment income and the self-employment tax. Indicate whether each of the statements below is true or false by clicking on the correct answer. To assess your answers, click the Check My Answers button at the bottom of the page.
  1. Employers control and direct the work of independent contractors.
  • A.
  • B.
  1. Social Security and Medicare taxes are similar to the self-employment tax.
  • A.
  • B.
  1. Self-employment profit is the same as self-employment income.
  • A.
  • B.
  1. The self-employment tax increases the income that is subject to tax.
  • A.
  • B.


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