cancel
Showing results for 
Search instead for 
Did you mean: 
Level 1

Self employment tax on residual income

I receive residual income for insurance policies sold several years ago.  My office  has been closed for several years and I non longer work.  Do I have to pay self employment taxes on this income?
1 Best answer

Accepted Solutions
Highlighted
Level 1

Self employment tax on residual income

The IRS looks to the origin of the payment to determine its taxability.  The residual income you receive is of the same character as the income you received when you were in business and fully self-employed. Consequently, it would still be subject to self-employment tax.  You also receive a tax deduction for half of the self-employment tax you pay (on Line 27 of your Form 1040).  You would report this income on your Schedule C.  TurboTax will handle the calculation of the self-employment tax and your deduction.  The following TurboTax link explains the Self-Employment tax.  

View solution in original post

3 Replies
Highlighted
Level 1

Self employment tax on residual income

The IRS looks to the origin of the payment to determine its taxability.  The residual income you receive is of the same character as the income you received when you were in business and fully self-employed. Consequently, it would still be subject to self-employment tax.  You also receive a tax deduction for half of the self-employment tax you pay (on Line 27 of your Form 1040).  You would report this income on your Schedule C.  TurboTax will handle the calculation of the self-employment tax and your deduction.  The following TurboTax link explains the Self-Employment tax.  

View solution in original post

Level 1

Self employment tax on residual income

Do to an injury that left me with a serious medical disorder since 1997 my accountant challenged the IRS & contacted the 2 companies they agreed the amount belonged in box 3. Being I'm a Vietnam Vet etc it was overturned as self employment income even the co.s by letter stated it was non employee income. Plus just last yr 2016 an IRS Advocate had ruling revisited and the IRS agreed. My problem is how do I get the doubled 13,492 back to the correct $6746 you see the IRS has seen my residuals go down for 15+ yrs now wham they went up 100%?
Level 1

Self employment tax on residual income

I haven't filed a form 1040 SE in 15 yrs was never an employee Sch C doesn't apply in this case.