How should the deduction for self-employment tax be treated with the change in the method for computing the Federal Income Tax Deduction?
The self-employment tax must be deducted as an itemized deduction on the cash basis. The Department’s position has been that the self-employment tax is considered paid when the federal tax return is completed and filed, whether the monies used to pay it came from estimated payments, withholding or money paid with the return. When the tax return is completed and filed the taxpayer is able to determine how much of his estimate and/or withholding is used to pay federal income tax and how much is used to pay self-employment tax, and not until then. As an example: A taxpayer pays $15,000 in estimated tax for 2001. When the 2000 return is filed in 2001 the taxpayer owes $5,000 in income tax and $9,180 in self-employment tax. His Federal Income Tax (FIT) deduction for 2000 would be his $15,000 estimated tax payments. Any 1999 refunds received in 2000 or 1999 payments made in 2000 would be reported on the appropriate lines. We are also assuming that there were no other refunds or liabilities r
Related Questions
- If a business has a net operating loss as a result of using this deduction, is it treated in the same manner as a net operating loss under the current tax code?
- How should the deduction for self-employment tax be treated with the change in the method for computing the Federal Income Tax Deduction?
- How is the federal income tax credit treated; specifically does it also reduce Alternative Minimum Tax liability?
