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

LADryver

Well-Known Member
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).
The Self Employment Tax is your Social Security contribution. It gets owed regardless.
 

vtcomics

Well-Known Member
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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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?
 

LADryver

Well-Known Member
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.
 

percy_ardmore

Well-Known Member
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).
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.
 

mls55

Member
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.
 

mls55

Member
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.
Post automatically merged:

Also, from another CPA website and NOLO Press


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.


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

Well-Known Member
Sponsor
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.
Post automatically merged:

Also, from another CPA website and NOLO Press


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.


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.
Yes business % of interest is deductible on schedule C
 

islanddriver

Well-Known Member
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
 

Jon Stoppable

Well-Known Member
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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