Skip to main content
April 3, 2023
Question

Self Employment Taxes

  • April 3, 2023
  • 1 reply
  • 0 views

I have been using Turbo Tax Deluxe for years.  I am a joint owner on some land in Texas that we lease out.  I've always used Form 4835 reporting the income as I'm not an active participant in the management of the land.  I had to upgrade to Turbo Tax Premier to obtain that form.  However, the system is still computing the self employment tax for me.  Is this a change that happened this year?  I did answer the question that I was not actively involved in the management of the land.  Thank you.

1 reply

DawnC
Employee
April 3, 2023

Are you sure you did not indicate that you materially participated in the activity?   If you don't materially participate, the activity should go to Form 4835 and carry over to Schedule E and not generate self-employment tax.   Or, do you have other income on your return that is generating the self-employment tax?    Did you report all of the land rental income in the Farm Rental section and not on Schedule F instead?  Schedule F (or Sched C) will generate SE tax.  

 

In order to use this form (and avoid self-employment tax on the income), you must not have materially participated in the activity.  You did materially participate if you meet one of the following four tests:

 

  • You do any three of the following four things: pay or guarantee payment of at least half the direct costs of producing the crop; furnish at least half the tools, equipment, and livestock used in producing the crop; consult with your tenant; inspect production activities periodically.
  • You regularly and frequently make or take an important part in making important management decisions.
  • You work 100 hours or more spread over five weeks or more in activities connected with crop production.
  • You do things that, considered in their total effect, show that you are materially and significantly involved in the production of the farm commodities.

 

Go back through the Farm Rental section in TurboTax to double-check your answers, and also preview Form 1040 to see if you have entered self-employment income anywhere on your return.   

 

 

On the first question in that section, make sure you select a farm RENTAL income type and not the first option which is 'I have income from operating a farm'.   Choose one or more options that reference rentals. 

 

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"