# child tax credit doesn't remove self-employment tax?



## Ignatowski (Mar 23, 2019)

I have done some guesses about 2019 taxes, to get an idea of how much I might owe.
I plugged-in my gross pay and deductions onto Schedule C, and I end-up with a small profit (of course).
I plug that "net profit" into schedule SE, and it produces a Self-Employment Tax of about 14% of that profit.

Back on my Form 1040, I add my small income to my wife's W-2 income; then deduct the Standard Deduction ($24k for married); then find the tax from the table. But when I deduct the Child Tax Credit, I get a negative number, so I'm supposed to write "-0-" (zero)... so we pay no federal taxes at all (that's a relief!).

But... below that, I'm supposed to copy-in the self-employment tax from Schedule SE. So, it looks to me like the Child Tax Credit counts against tax on net income (W-2 or 1099), even to the point that we won't pay any income tax at all... but the Child Tax Credit does NOT count against the Self-Employment Tax from Schedule SE? 

If so, it looks like no matter how small your income is, you will always owe 14% of your Net profit from driving Uber/Lyft (income beyond expenses).


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## Uberbrent (Mar 22, 2016)

Some people use an accountant that will take responsibility for a mistake if they give the wrong advice. Others look on a forum for rideshare drivers until they find the answer they want and use that. What could possibly go wrong?


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## kingcorey321 (May 20, 2018)

why not ask a tax pro ?
my advice is if you did not make at least 20k you will not be getting a 1099k in the usa if they do it the same as last year .
meaning nobody knows you earned rideshare profit why claim it ?


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## PTB (Feb 3, 2015)

mileage write-off works for me.


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## Uberbrent (Mar 22, 2016)

Uber still reports it to the IRS is a good reason to claim it. Willful failure to claim income to avoid taxes doesn’t absolve you from those taxes. Remember, the IRS is the only government agency where you’re guilty until proven innocent.


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## islanddriver (Apr 6, 2018)

Just wondering how do you know Uber still sends it to IRS.if it's under 20,000


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## Seamus (Jun 21, 2018)

islanddriver said:


> Just wondering how do you know Uber still sends it to IRS.if it's under 20,000


It doesn't. If you don't get a 1099k then either does the govt. They could find out auditing Uber however.


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## Uberbrent (Mar 22, 2016)

islanddriver said:


> Just wondering how do you know Uber still sends it to IRS.if it's under 20,000


Are you serious? They pay you don't they? If they have an income stream you better believe they are going to show they paid someone to offset the revenue or they have to pay taxes on it. You may not get a 1099, but you do get a form and they do report it. Unreported income has brought down many criminals even back to the days of Elliot Ness.


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## IthurstwhenIP (Jan 12, 2018)

Just file it

People like you keep the IRS too busy to look into people like me


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## Older Chauffeur (Oct 16, 2014)

I'm waiting for @UberTaxPro to weigh in on this. He's the go-to tax guy on the forum and will give you the straight skinny.


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## Ignatowski (Mar 23, 2019)

PTB said:


> mileage write-off works for me.


Yeah, I'm special :smiles: . This morning: 3 hours, 6 rides, $90.74 pay, but only 71 miles driven for a $41.16 deduction and $49.58 taxable. 14% of that (FICA/SSA self-employment tax) is $6.94 . My year-to-date mileage deduction is only 54% of earnings. I put effort into minimizing wasted miles, but it does bite you a bit at tax time.


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## Older Chauffeur (Oct 16, 2014)

Just FYI, the total is 15.3%, with a threshold of $400 net profit from self employment. You then get a credit for half of it on your Form 1040 if I recall correctly.

Disclaimer: I’m not a tax professional.


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## UberTaxPro (Oct 3, 2014)

Ignatowski said:


> I have done some guesses about 2019 taxes, to get an idea of how much I might owe.
> I plugged-in my gross pay and deductions onto Schedule C, and I end-up with a small profit (of course).
> I plug that "net profit" into schedule SE, and it produces a Self-Employment Tax of about 14% of that profit.
> 
> ...


Self employment tax is FICA(social sec & medicare). Child tax credit offsets income tax, not FICA.


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## Ignatowski (Mar 23, 2019)

UberTaxPro said:


> Self employment tax is FICA(social sec & medicare). Child tax credit offsets income tax, not FICA.


Thanks, UberTaxPro. That makes sense: Social Security is supposed to be a "forced 401(k)" (you are supposed to eventually get your money back), so it's not really a "tax." Unfortunately, this year (with $7k profit) will _not_ be one of my top 35 years of earning, so that mandatory contribution will not help my retirement at all. (and this is probably a good warning for Uber drivers: doing rideshare for years would reduce your retirement social security check later).



Older Chauffeur said:


> Just FYI, the total is 15.3%, with a threshold of $400 net profit from self employment. You then get a credit for half of it on your Form 1040 if I recall correctly.


Yes, 15.3% on 92.35% of profit (=14.12955%). I will probably have about $7k of net profit after mileage deduction, so I'm well past the cutoff .

I thought there was a "deduction" of half of the SE tax, but not a "credit" (?). We won't pay any tax (from the table), so another deduction doesn't help us so much.

We _will_ get some earned income credit, which is nice.

*TL;DR: if you make a profit at rideshare (more pay than mileage deduction), then you will pay 14% of it back at tax-time as "Self-Employment Tax" (FICA/Social Security).*


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## Older Chauffeur (Oct 16, 2014)

Yeah, a mistake on my part calling it "a credit." What I should have said was "you get credit." But as you know, the IRS refers to "refundable credits." So you correctly referred to it as a deduction. I remembered half of SECA being subtracted from my AGI. The C in both FICA and SECA stands for "Contributions." Haha! Like we have a choice. And not to get political, but if we were to get Medicare for all, I'm guessing that contribution would increase, perhaps substantially.

This explains it better:
*Tax Treatment of the SECA Tax *
The employer portion of the payment is deductible as a business expense. In other words, the IRS allows self-employed individuals to use the employer half of the self-employment as a business deduction for purposes of calculating the tax. Consequently, after deducting the 7.65% half-portion (from 50% of the 15.3% total SECA tax), individuals who are self-employed typically pay SECA tax on 92.35% of their net earnings, rather than 100%. Still, the tax represents a significant cost of being self-employed.


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## Launchpad McQuack (Jan 8, 2019)

Uberbrent said:


> Willful failure to claim income to avoid taxes doesn't absolve you from those taxes.


Well...............that kind of shoots a hole in my strategy.


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## observer (Dec 11, 2014)

islanddriver said:


> Just wondering how do you know Uber still sends it to IRS.if it's under 20,000


Not sure about other states but in California, the state requires anyone that uses an independent contractor to report any payments over 600 bux per year.

Once the state gets it, the IRS is one step away.


Actually, it appears the IRS requires Uber to report any payments over 600 bux per year as well.

https://www.irs.gov/businesses/smal...reporting-payments-to-independent-contractors
*Reporting Payments to Independent Contractors*

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If you pay independent contractors, you may have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your trade or business. If the following four conditions are met, you must generally report a payment as nonemployee compensation.

You made the payment to someone who is not your employee;
You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
You made the payment to an individual, partnership, estate, or in some cases, a corporation; and
You made payments to the payee of at least $600 during the year.
Form 1099-MISC, Miscellaneous Income (PDF), is transmitted with Form 1096, Annual Summary and Transmittal of U.S. Information Returns (PDF)_,_ which is similar to a cover letter for your Forms 1099-MISC.
Refer to Instructions for Form 1099-MISC (PDF), General Instructions for Forms 1099, 1098, 5498, and W-2G (PDF), and Publication 1220, Specifications for Filing Form 1098, 1099, 5498 and W-2G Magnetically or Electronically (PDF), for more information.
Nonemployee compensation paid to nonresident aliens is reported on Form 1042-S, Foreign Persons' U.S. Source Income Subject to Withholding (PDF), where some withholding may be required.
Similar to Form 1096, Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons (PDF), must be filed if Form 1042-S is required. For more information on withholding on payments to nonresident aliens, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities and Publication 901, U.S. Tax Treaties_._
*Information Reporting Call Site*
The IRS operates a centralized call site to answer questions about reporting on Form 1099 and other information returns. If you have questions related to reporting on information returns, call (866) 455-7438.


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## islanddriver (Apr 6, 2018)

You are right irs law is payment for work over $600 must be reported. But Uber is not paying us the pax is , Uber is just collecting it for us and taking their fees from pax payment to us for collecting it. There for they only have to send a 1099k over $ 20,000 .


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## Older Chauffeur (Oct 16, 2014)

islanddriver said:


> You are right irs law is payment for work over $600 must be reported. But Uber is not paying us the pax is , Uber is just collecting it for us and taking their fees from pax payment to us for collecting it. There for they only have to send a 1099k over $ 20,000 .


Unless you have earnings over $600 from referrals, incentives etc that Uber pays, not the pax. You then get a 1099misc.


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## islanddriver (Apr 6, 2018)

Yes then you get 1099.


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## percy_ardmore (Jun 4, 2019)

Older Chauffeur said:


> Just FYI, the total is 15.3%, with a threshold of $400 net profit from self employment. You then get a credit for half of it on your Form 1040 if I recall correctly.
> 
> Disclaimer: I'm not a tax professional.


You are correct, sir.


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## LADryver (Jun 6, 2017)

Ignatowski said:


> I have done some guesses about 2019 taxes, to get an idea of how much I might owe.
> I plugged-in my gross pay and deductions onto Schedule C, and I end-up with a small profit (of course).
> I plug that "net profit" into schedule SE, and it produces a Self-Employment Tax of about 14% of that profit.
> 
> ...


The Self Employment Tax is your Social Security contribution. It gets owed regardless.


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## vtcomics (Oct 9, 2018)

*TL;DR: if you make a profit at rideshare (more pay than mileage deduction), then you will pay 14% of it back at tax-time as "Self-Employment Tax" (FICA/Social Security).*
[/QUOTE]

And it's MIND BLOWING how many rideshare drivers have NO CLUE about self employment tax. I'd guess half of the drivers dont even report their rideshate earnings; forget about self employment tax! I'm right around the same net profit number as you. I had thought that with my other jobs (which had taxes withheld) and a max TRADITIONAL IRA contribution I could get enough of of a refund to offset the self employment tax. Uber Tax Pro would I still need to send a payment for the self employment tax and receive the income tax refund separately?


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## LADryver (Jun 6, 2017)

vtcomics said:


> *TL;DR: if you make a profit at rideshare (more pay than mileage deduction), then you will pay 14% of it back at tax-time as "Self-Employment Tax" (FICA/Social Security).*
> 
> And it's MIND BLOWING how many rideshare drivers have NO CLUE about self employment tax. I'd guess half of the drivers dont even report their rideshate earnings; forget about self employment tax! I'm right around the same net profit number as you. I had thought that with my other jobs (which had taxes withheld) and a max TRADITIONAL IRA contribution I could get enough of of a refund to offset the self employment tax. Uber Tax Pro would I still need to send a payment for the self employment tax and receive the income tax refund separately?


I'll step in for now and offer you the answer. You are asking if you still get your expected income tax refund and pay self-employment tax seperately. On your tax return the self-employment tax is added to all other taxes and reduces the expected refund including from tax credits but if you still paid in or are credited more than you owed you will get a refund. There is no separate payment. One way you can handle this is to use quarterly estimated tax to pay your self-employment tax during the year. That way you can apply those payments on your tax return and get a higher refund. Estimated tax payments can be used to your advantage this way if it works for you.


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## percy_ardmore (Jun 4, 2019)

Ignatowski said:


> I have done some guesses about 2019 taxes, to get an idea of how much I might owe.
> I plugged-in my gross pay and deductions onto Schedule C, and I end-up with a small profit (of course).
> I plug that "net profit" into schedule SE, and it produces a Self-Employment Tax of about 14% of that profit.
> 
> ...


If you report self-employment profit, there will be SE tax calculated. Whether you will owe anything for entire return depends on, well, the rest of your return. If SE were not in the picture maybe you're getting a refund of R. If SE tax, refund will be R - SE tax.


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## percy_ardmore (Jun 4, 2019)

SS is based on your 35 highest earning years. If you don't have 35 years of some income, not good.


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## mls55 (May 27, 2015)

You can also deduct the business portion of the interest paid on your automobile loan and the business portion of the personal property taxes related to your automobile (not registration fees). These items are not considered operating expenses and as such are not included in the standard mileage rate.


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## islanddriver (Apr 6, 2018)

I would check what you say about car loan , if you take a milage deduction . You can't claim car loan .


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## mls55 (May 27, 2015)

IRS Publ 463, If you don't believe me, let's hear from Uber Tax Pro.

*Interest.*

If you are an employee, you can't deduct any interest paid on a car loan. This applies even if you use the car 100% for business as an employee.

However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). You can't deduct the part of the interest expense that represents your personal use of the car.

Also, from another CPA website and NOLO Press

https://www.stevenmellardcpa.com/tax-guide-for-vehicle-expenses/
*Standard mileage rate*

With this method, you multiply the annual flat rate prescribed by the IRS by the number of business miles you drive, and add on any business-related parking fees, taxes, tolls, and interest expense on your car loan. (Interest expense is not deductible by employees.) All other costs, including depreciation, are built into the flat rate.

However, you can't use the standard mileage rate in certain cases. For instance, this method is not available if you've previously claimed Section 179 "expensing" or accelerated depreciation for the car.

Although the standard mileage rate is generally more convenient than the actual expense method, you still must record the date, mileage, business location, names and relationships of clients, and the business purpose for each trip. It is recommended that you keep a contemporaneous diary for both methods.

https://www.nolo.com/legal-encyclopedia/how-deduct-your-local-business-driving-expenses.html
The only expenses you can deduct (because these costs aren't included in the standard mileage rate) are:

interest on a car loan
parking fees and tolls for business trips (but you can't deduct parking ticket fines or the cost of parking your car at your place of work), and
personal property tax that you paid when you bought the vehicle, based on its value-this is often included as part of your auto registration fee.


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## UberTaxPro (Oct 3, 2014)

mls55 said:


> IRS Publ 463, If you don't believe me, let's hear from Uber Tax Pro.
> 
> *Interest.*
> 
> ...


Yes business % of interest is deductible on schedule C


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## islanddriver (Apr 6, 2018)

Never knew about the interest. Bit I don't have a loan so it doesn't mean anything me. Hope it helps some one elae


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## percy_ardmore (Jun 4, 2019)

Launchpad McQuack said:


> Well...............that kind of shoots a hole in my strategy.


Google Al Capone.


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## Jon Stoppable (Dec 11, 2019)

If you can't use all of your child credit against income tax, you may be able to take additional child credit, which is refundable. Effectively, that can offset SE tax, even though it doesn't do so directly. See Form 8812.

I have a bunch of kids and between EITC, child credit, education credits etc. I haven't paid taxes in many years. 2005 maybe? And then a few years after the last one leaves the house, I'll pull my SS benefits and leave the country for somewhere warmer and cheaper. See ya USA, thanks for the memories!


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