The correct self employment tax based on the net self employment income of $2,149.61, is $303.72, entered on Form 1040, line 57. The example below will show how the calculations are done. Half of the self employment tax is used as an adjustment to income on Form 1040, line 27 ($151.86). There are other things on the return that are reducing your overall balance of tax due. Check the credits and payments section of the Form 1040 to see what is used to reduce the amount you owe.
The calculation
of the self employment tax itself is as follows.
Self
employment net income (income less expenses) is first reduced by half of the
self employment tax rate before the self employment tax is applied to that net
income.
- Example of self employment tax calculation with a $3,000 net
profit:
- Self employment tax: $3,000 x .9235 x .153 =
$424 (.153 x .50 =
.0765 // 1 - .0765 = .9235)
