Form 1040 (Schedule Se) Birmingham Alabama 2024-2025

Form 1040 (Schedule Se) Birmingham Alabama: What You Should Know

At this point we need to figure how much of this qualifying net income has not been subject to Social Security, Medicare, and FTA. The self-employment tax section in the tax chapter explains how to figure self-employment taxes after adjusting tax for a business loss. When calculating net farm income on Schedule F in the self-employment tax section, farm profit has not been subject to Social Security, Medicare, or FTA because all expenses paid were for the use of a farm, the profit of which is exempt from Social Security and Medicare payments. We will now subtract the amount of self-employment tax payment from the amount of self-employment profit after we adjust for the farm expenses and have the following calculation. The farmer makes 7,650 net profit on the first year's production 9,640 plus net operating loss carry over to 2nd year 3,080 plus net farm expense carry over to 3rd year 2,940. The farmer does not make a qualifying loss in his business, so his net income is 7,650/10,480 = 3,076.50. The farmer has made a 3,076.50 3,080.00 2,940.00 + 9,640.00 8,880.00 = 19,440.40 in taxable income. The self-employment tax payments for the next year are 2,660 (7,650 – 19,440.40) less 4,000 total self-employment expense deduction and tax of 2,660 (7,650 – 19,440.40) = 3,250. Total payment 8,960.50. The farmer has made a 3,250 income tax payment 9,760.00 (6,980 minus 3,250 is 2,160.00, rounded to 2,160.00 total tax payment of 1,640.30.) The farmer paid a 1,640.30 penalty and lost his Social Security payments 1,140.30. Because net income from the farm was 19,440.40, 1,640.30 would have been subtracted from his net income for the self-employment tax payments of 4,000.

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