Self-employment tax

[david-wagger]

While preparing our returns, I see that "[TT] calculated [our] self-employment tax to be [$XXX]". Does this mean that the $XXX will be paid when I submit the returns? If not, how does it get paid? TT never indicated that any penalty applies, so all of this is very unclear. Please make what happens clear to me. Thanks.

[AnthonyC · Accepted solution]

Yes, any self employment tax due is already being calculated into your tax due with your 2016 return (or subtracted from any refund you expect to receive).  The SE tax is paid along with any income taxes you owe and it is all done on your Form 1040.  There is no need for any additional payments to satisfy this tax.  You can see SE tax on Line 57 of Form 1040.

Also, self employment taxes aren't a penalty.  They are the social security and medicare taxes you must pay.  When you have a W2 job, these taxes get taken out of your paycheck automatically and are split between you and your employer.  When you are self-employed, however, you have to pay the full amount yourself.

[david-wagger]

Thanks for the clear answer. By penalty, I meant that not paying SE taxes in the proper quarter would cause a penalty to be owed for paying late in addition to the owed SE taxes. BTW, your answer becomes clear once TT filers are allowed to preview their returns before filing but only after paying TT charges, which I can understand.

[AnthonyC]

That would be an estimated tax penalty (Line 79).  It is also calculated by TurboTax but depending on the amount of SE tax owed you may not owe the penalty.  Also, there can be exceptions for the penalty and you can review that section under Federal Tax > Other Tax Situations > Additional Tax Payments > Underpayment penalties

Yes, the full return isn't visible until after payment.  But, you can view your Form 1040 itself before payment (but not the supporting forms and schedules) if you go to My Account > Tools > View Tax Summary > click Preview my 1040 (its in the gray header).  Also, if you are ever in need of wanting to check something before going all the way to the filing process you can go to My Account > Print Center and follow the prompts.  The program will take your payment then and you can download the pdf of your return at that moment then.  So, say you want to see your full Schedule C after you enter your business income but don't want to go through the rest of the return yet.  You can use this option to pay and download the return to view the forms before filing.