TN 11 (09-92)

Citations:

Social Security Act — Section 203

Regulations No. 4 - Sections 404.429, 404.446

A. POLICY

Income from self-employment received after the initial year of entitlement to RSI benefits can be excluded for deduction purposes from gross earnings in the taxable year received, if the income is not attributable to services performed after the initial month of entitlement.

NOTE: For tax years after 1989, the new “net profit” that is derived from the above policy is then subject to the SE tax multiplier of .9235 percent to determine the earnings for deduction purposes. See RS 02505.130B., Example 2.

See RS 02510.017 regarding the SP posting procedure.

EXCEPTION: The SEI exclusion provision does not apply to income from royalties.

B. PROCEDURE

Apply the SE income exclusion rule to SE income only and not to wages.

NOTE: Under this provision, self-employment earnings excluded from the year received are not added to the total yearly earnings of the year in which the services resulting in the income were performed.

C. REFERENCE

See RS 02505.060 regarding royalties.