2011 Schedule C-1• Big change is in the header lines I and J

– Self employed may have to issue a 1099 to any sub-contr. whom they pay $600 or more during the year. This is the case only where the Sch C represents a major part of their income.

– If they answer yes to line I, then THE RETURN IS OUT OF SCOPE FOR TCE

– Similarly for Sch C-EZ question F

Schedule C-2

• Next change is in Part I lines 1a-1d– Note that for line 1a, instruction is to

enter 0 for 2011. IRS is delaying using this entry for 1 yr.

– Thus, ignore Merchant card and 3rd party payments which are reported on the new form 1099-K

Schedule C-3• Report all income from 1099s, cash,

check and merchant cards or 3rd party on line 1b

• If a W-2 is received and “statutory employee” box is checked, report that income on line 1c

• If both Statutory employee income and normal self employment income are received, then 2 Schedule Cs are required

• Calculate the SE tax which is 13.3% for income of $106,800 or less. Previous percentage was 15.3%

• If over $106,800 then only Medicare 2.9% factor multiplies line 4, then add $11,107.20 per instructions. [(4.2 + 10.4)% * 106,800]

• Self employment deduction for Form 1040 line 27 is calculated on line 6. This factor previously was 0.5.

• For 2011 it is 0.5751 or the ratio of 7.65/13.30 which is the [employer’s rate/(employers rate +employees rate)]

Schedule SE lines 5 and 6