Social security and self employment

Use Schedule C and Schedule SE. Both are available for download at

You use Form 1040 Schedule C-EZ to report your self-employment income and any business expenses. The net income from the C-EZ goes on Schedule SE where you compute your self-employment taxes (social security & medicare tax). The SE tax gets posted to page 2 of the 1040; 1/2 the SE tax gets posted to the front page of the 1040 as an AGI deduction. The SSA will give you retirement credit based on those amounts.

-- Alan

Did you perform this child care in your own home (child brought to you?) or did you work in the home of the child? If the former, then you file schedule c and schedule se for self employment tax. If the latter, then you should have received a W2 form from the child's parents, i.e. your employer. ChEAr$, Harlan Lunsford, EA n LA

It depends on whether you were an employee or an independent contractor. In the case of child care, IMO it boils down to whether you cared for the child in the child's home or in yours. If you went to the child's home you were an employee. The parent needs to issue a W-2 and pay the FICA/Medicare taxes. You report the income on line 7 just like any other wages. Your SS earnings credit comes from the original W-2, which is filed with SSA. If you cared for the child in your home, you have Schedule C income from self-employment, not line 7 wage income. Schedule C flows to Schedule SE, where you compute self-employment tax. It's from Schedule SE that you get your SS earnings credit.

-- Phil Marti Clarksburg, MD

You are providing daycare services, and in that capacity you are self-employed. Whether you received a 1099 or not, you should file a Schedule C (or C-EZ, if expenses are minimal), and the companion SE -- which calculates Social Security and Medicare contributions required for the amount of income reported. That should get you the credit you desire for having paid into Social Security. Bill

Schedule SE

Missy Doyle

Report these "self-employment" receipts on Schedule C-EZ and reduce them by any relevant expenses there. Then use Short Schedule SE. Its self-employment tax goes to SS and Medicare.

First, be aware that anyone who pays a "household worker" (e.g., babysitter) more than $1,500 a year is supposed to withhold income and Social Security taxes and provide a W-2. Presumably your niece's parents did not do this. As such, you do not just add this to your tax return as "extra income." The $3,900 is reported on Schedule C as self employment income ("Babysitting"). You can also use this form to deduct any related expenses to reduce your net income. You must also file Schedule SE to compute the Social Security taxes. Your Federal income tax will be at whatever your joint marginal tax rate may be plus you will be taxed at 15.3% for Social Security taxes (about $600 in this case), plus State taxes. In 2006, you needed $970 in net self employment income to earn 1 Social Security credit ($1,000 in 2007). If your entire $3,900 is taxed for Social Security purposes, you will earn 4 credits.