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3. Self-Employment Tax
Section 1401 imposes a percentage tax on self-employment
income of every individual. See Jackson v. Commissioner, 108
T.C. 130 (1997). Self-employment income is defined as “the net
earnings from self-employment derived by an individual * * *
during any taxable year”. Sec. 1402(b). The term “net earnings
from self-employment” is defined as “the gross income derived by
an individual from any trade or business carried on by such
individual, less the deductions * * * which are attributable to
such trade or business”. Sec. 1402(a).
For purposes of the self-employment income tax, a “trade or
business” has the same meaning as when used in section 162,
except that it does not include the performance of service by an
individual as an employee. Sec. 1402(c)(2).1 The definition of
an employee applicable to this case is “any individual who, under
the usual common law rules applicable in determining the
employer-employee relationship, has the status of an employee”.
Sec. 3121(d)(2); see sec. 1402(d).
1 See also sec. 1.1402(c)-3(a), Income Tax Regs., which
provides as follows: “the performance of service by an individual
as an employee, as defined in the Federal Insurance Contributions
Act (chapter 21 of the Internal Revenue Code) does not constitute
a trade or business within the meaning of sec. 1402(c) and sec.
1.1402(c)-1”.
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Last modified: May 25, 2011