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If You Are Self-EmployedSSA Publication No. 05-10022, January 2008, ICN 454900 [View .pdf] (En EspaƱol) |
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Paying Social Security and Medicare taxesThe Social Security tax rate for 2008 is 15.3 percent on self-employment income up to $102,000. If your net earnings exceed $102,000, you continue to pay only the Medicare portion of the Social Security tax, which is 2.9 percent, on the rest of your earnings. |
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Work creditsYou need to have worked and paid Social Security taxes for a certain length of time to get Social Security benefits. The amount of time you need to work depends on your date of birth, but no one needs more than 10 years of work (40 credits). |
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Figuring your net earningsNet earnings for Social Security are your gross earnings from your trade or business, minus your allowable business deductions and depreciation. Some income does not count for Social Security and should not be included in figuring your net earnings:
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Optional methodIf your actual net earnings are less than $400, your earnings can still count for Social Security under an optional method of reporting. The optional method can be used if your gross earnings are $600 or more or when your profit is less than $1,600. You can use the optional method only five times in your life. Your actual net must have been $400 or more in at least two of the last three years, and your net earnings must be less than two-thirds of your gross income. Here is how it works:
Special note for farmers: If you are a farmer, you can use the optional reporting method every year. It is not necessary to have had actual net earnings of at least $400 in a preceding year. We suggest you call us and ask for A Guide For Farmers, Growers And Crew Leaders (Publication No. 05-10025). |
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How to report earningsYou must complete the following federal tax forms by April 15 after any year in which you have net earnings of $400 or more: You must complete the following federal tax forms by April 15 after any year in which you have net earnings of $400 or more:
You can get these forms from IRS and most banks and post offices. Send the tax return and schedules along with your self-employment tax to IRS. Even if you do not owe any income tax, you must complete Form 1040 and Schedule SE to pay self-employment Social Security tax. This is true even if you already get Social Security benefits. |
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Family business arrangementsFamily members may operate a business together. For example, a husband and a wife may be partners or run a joint venture. If you operate a business together as partners, you should each report your share of the business profits as net earnings on separate self-employment returns (Schedule SE), even if you file a joint income tax return. The partners must decide the amount of net earnings each should report (for example 50 percent and 50 percent). |
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Contacting Social SecurityOur website is a valuable resource for information about all of Social Security’s programs. There are a number of things you can do online. In addition to using our website, you can call us toll-free at 1-800-772-1213. We can answer specific questions from 7 a.m. to 7 p.m., Monday through Friday. We can provide information by automated phone service 24 hours a day. (You can use our automated response system to tell us a new address or request a replacement Medicare card.) If you are deaf or hard of hearing, you may call our TTY number, 1-800-325-0778. We treat all calls confidentially. We also want to make sure you receive accurate and courteous service. That is why we have a second Social Security representative monitor some telephone calls. |
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