Instructions for the 2017 Schedule SE Form

For the 2017 tax year, self-employed individuals used Schedule SE (Form 1040) to calculate their self-employment tax. This tax consists of Social Security and Medicare taxes, similar to those withheld from an employee’s paycheck. The Social Security Administration uses the information reported on Schedule SE to determine future benefits. This tax obligation applies regardless of age and even if the individual is already receiving Social Security or Medicare benefits.

Who Was Required to File for 2017

Filing a 2017 Schedule SE was a requirement for individuals with net earnings from self-employment of $400 or more. This threshold applied to the profits generated from operating a business as a sole proprietor or independent contractor. The requirement to file was based on the net earnings, not the gross income of the business. Partners in a partnership also had to evaluate their filing requirements based on their share of partnership income. A less common situation that required filing Schedule SE was for church employees who received wages of $108.28 or more from a church or qualified church-controlled organization that had elected an exemption from employer Social Security and Medicare taxes.

Information Needed to Complete the Form

The most important figure was the net profit or loss from their self-employment activities. This amount was calculated on other forms, such as line 31 of Schedule C (Form 1040), line 34 of Schedule F (Form 1040), or line 14 (Code A) of Schedule K-1 (Form 1065) for partnership income. These documents provide the starting point for the self-employment tax calculation.

It was also necessary to have any 2017 Forms W-2 on hand. If the taxpayer also worked as an employee and had wages, this information was needed to correctly calculate the Social Security portion of the self-employment tax. The total wages from a W-2 would affect how much of the self-employment earnings were subject to the Social Security tax rate, due to an annual income limit. Without this information, the tax could be overcalculated.

Calculating the 2017 Self-Employment Tax

The calculation was done by multiplying the total net earnings from self-employment by 92.35%. This adjusted figure is the base for applying the tax rates.

For 2017, the self-employment tax consisted of two parts. The Social Security tax was 12.4% on the first $127,200 of combined wages, tips, and net earnings. If an individual had W-2 wages, those wages reduced the $127,200 limit before the self-employment earnings were considered. The second part was the Medicare tax, which was 2.9% of all net earnings, with no income limit.

Most filers could use the Short Schedule SE. However, the Long Schedule SE was required for individuals who also received wages reported on a Form W-2, as this affected the Social Security wage base calculation. The long form was also necessary for those using one of the optional methods to figure their net earnings, which could sometimes allow individuals with low profits or a loss to still receive credit for Social Security coverage.

Reporting the Tax and Deduction on Form 1040

The total self-employment tax figured on Schedule SE was reported on Line 57 of Form 1040, under the “Other Taxes” section. This amount was then added to the income tax liability to determine the total tax due for the year.

A benefit for self-employed individuals is the ability to deduct one-half of their self-employment tax. This deduction is not an itemized deduction but an adjustment to income. For the 2017 tax year, this deductible amount, which is calculated directly on the Schedule SE form, was entered on Line 27 of Form 1040. This deduction lowered the taxpayer’s adjusted gross income (AGI), which could result in a lower overall income tax liability.