I am Self-Employed and had made $2,149.61 in the 2017 tax year. I am using Schedule C and Schedule SE to calculate taxes, and had determined through manual calculations I owe $328 to the IRS... However, I'm getting conflicting reports, as I had initially used TurboTax and it's suggesting I only owe the IRS $154.
How did TurboTax come to that conclusion? The only way I can come close to that number is through Long Schedule SE, which on Line 12 determined my Self-Employment Tax is $303.72 which becomes $151.86 after my one-half deduction. Does this mean I am to use my one-half deductible for Line 57 of my 1040 (aka, I do not owe the IRS $328, but $151.86?)
Thank you for reading this question and, hopefully, help me clear up this confusion!
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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.
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