TN 13 (08-10)

Citations:

Section 211 of the Social Security Act and
Regulation No.4 - Section 404.1080 Social Security Act

A. Definitions

1. SEI

Self-Employment Income (SEI) is the amount of net earnings from self-employment (NESE) derived from an individual's trade or business during any taxable year beginning after 1950. However, the term SEI does not include the amount of NESE that is in excess of the maximum established for a given year. For example, if an individual has both wages and SEI in a tax year only the difference between covered wages and the maximum creditable in a year can be SEI. See RS 01801.100 for FICA maximum for a particular year.

2. NESE

Net Earnings from Self-Employment (NESE) is the gross income derived by an individual from any trade or business carried on by that individual less the allowable deductions which are attributable to that trade or business.

The NESE must be at least $400 for a taxable year before any NESE will be taxable and creditable as SEI; except that certain “church” employees who are treated as self-employed must report earnings of $100 or more see RS 01802.234.

NOTE: Effective with taxable years beginning after 12/31/89, a new deduction of 7.65% is required when computing NESE.
See RS 01803.001 and RS 01803.002 for a discussion of NESE.

The self-employed individual cannot be a nonresident alien, except as provided by international agreements, see RS 01803.050 for a discussion of the effect of residence and citizenship in determining NESE.

B. Reference

Coverage of Self-Employment, RS 01801.001