Page 254 - Individual Forms & Instructions Guide

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Community Income dotted line to the left of Schedule SE, If you and your spouse make the
line 3, enter “Exempt community in- election for a farm rental business that
If any of the income from a business (in-
cluding farming) is community income, come” and the allocated amount. Figure you report on Form 4835, Farm Rental
the amount to enter on line 3 as follows.
Income and Expenses, each of you must
then the income and deductions are re-
• If the allocated amount is a net
ported as follows. profit, subtract it from the total of lines file a separate Form 4835 to report your
share of farm rental income based on
• If only one spouse participates in
the business, all of the income from that 1a, 1b, and 2. crops or livestock produced by the ten-
ant. Don’t file Schedule SE unless you
business is the self-employment earn- • If the allocated amount is a loss,
ings of the spouse who carried on the treat it as a positive amount and add it to have other income subject to the SE tax.
the total of lines 1a, 1b, and 2.
business. Fiscal Year Filers
• If both spouses participate, the in- Community income included on If your tax year is a fiscal year, use the
come and deductions are allocated to the ! Schedule(s) C or F must be tax rate and annual earnings limit that
spouses based on their distributive CAUTION divided for income tax purpo- apply at the time the fiscal year begins.
shares. ses based on the community property Don’t prorate the tax or annual earnings
• If either or both spouses are part- laws of your state. See Pub. 555 for limit for a fiscal year that overlaps the
ners in a partnership, see Partnership In- more information. date of a change in the tax or annual
come or Loss, later. earnings limit.
• If both spouses elected to treat the Qualified Joint Ventures
business as a qualifying joint venture, If you and your spouse materially partic-
see Qualified Joint Ventures, later. ipate as the only members of a jointly Line Instructions
Married filing separately. If you and owned and operated business, and you
your spouse had community income and file a joint return for the tax year, you You will need to figure your net earn-
file separate returns, attach Schedule SE can make a joint election to be taxed as ings from self-employment. To find out
to the return of each spouse with a qualified joint venture instead of a what is included as net earnings from
self-employment earnings under the partnership. For information on what it self-employment, see Net Earnings
rules described earlier. Also, attach means to materially participate, see Ma- From Self-Employment, later.
Schedule(s) C or F (showing the spou- terial participation in the Instructions
se's share of community income and ex- for Schedule C. Enter all negative amounts in
penses) to the return of each spouse. TIP (parentheses).
To make this election, you must di-
Spouse who carried on the business. vide all items of income, gain, loss, de-
If you are the only spouse who carried duction, and credit attributable to the Instructions for Part I
on the business, you must include on business between you and your spouse
Schedule SE, line 3, the net profit or in accordance with your respective inter- You Have Only Church
(loss) reported on the other spouse's ests in the venture. Each of you must file
Schedule C or F (except in those cases a separate Schedule C or F. On each line Employee Income Subject
described later under Income and Losses of your separate Schedule C or F, you to SE Tax
Not Included in Net Earnings From must enter your share of the applicable If your only income subject to SE tax is
Self-Employment). Enter on the dotted income, deduction, or loss. Each of you church employee income (described ear-
line to the left of Schedule SE, line 3, must also file a separate Schedule SE to lier under Employees of Churches and
“Community income taxed to spouse” pay SE tax, as applicable. Church Organizations), skip lines 1
and the amount of any net profit or through 4b. Enter -0- on line 4c and go
(loss) allocated to your spouse as com- For more information on qualified to line 5a.
munity income. Combine that amount joint ventures, go to IRS.gov/QJV.
with the total of lines 1a, 1b, and 2. En- Rental real estate business. If you and Note. Income from services you per-
ter the result on line 3. your spouse make the election to be form as a minister, member of a reli-
taxed as a qualified joint venture for gious order, or Christian Science practi-
Spouse who didn’t carry on the busi­ your rental real estate business, the in- tioner isn’t church employee income.
ness. If you aren’t the spouse who car- come generally isn’t subject to SE tax.
ried on the business and you had no oth- To indicate that election, be sure to Line 1b
er income subject to SE tax, enter “Ex- check the “QJV” box in Part I, line 2, of If you were receiving social security re-
empt community income” on Schedule 2 each Schedule E that the rental property tirement or social security disability
(Form 1040), line 4. Don’t file Sched- is listed on. Don’t file Schedule SE un- benefits at the time you received your
ule SE. less you have other income subject to Conservation Reserve Program (CRP)
But if you have $400 or more of oth- SE tax. For an exception to this income payment(s), enter the amount of your
er earnings subject to SE tax, you must not being subject to SE tax, see item 3 taxable CRP payment(s) on line 1b.
file Schedule SE. Include on Sched- under Other Income and Losses Inclu- These payments are included on Sched-
ule SE, line 1a or 2, the net profit or ded in Net Earnings From Self-Employ- ule F, line 4b, or listed on Schedule K-1
(loss) from Schedule(s) C or F allocated ment, later. (Form 1065), box 20, code AH.
to you as community income. On the

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