[Nate]

I’m curious if anyone knows how the exam tests self employment tax. I ran into an issue when I realized that the material I have (Roger), teaches self employment deduction tax different than how it’s calculated on Schedule SE. So with my course material, they basically calculate SE tax by taking Sch C income after expenses, and multiplying that by 7.65% (15.3%/2) to get the deduction, and they quiz it like that too. However, on Sch SE, the instructions have you take the Sch C income after expenses, multiply that number by 92.35% then multiply that number by 7.65% to get the SE Tax deduction. I’m curious, on the exam, how is it tested? Is the SE tax deduction basically the Sch C income multiplied by 7.65%? Or is it Sch C income multiplied by 92.35% then multiplied by 7.65%? Any help is greatly appreciated, thanks!

[lam2848]

On Becker we multiply SE income by 92.35% and then 15.3% to get SE tax.

[Nate]

Thank you so much! I'll just assume that the exam will calculate it like Becker and Schedule SE. I'll go through Roger another time but I have yet to find anywhere where it mentions backing out the employer portion (multiplying it by 92.35%) nor have I seen it quizzed that way yet. Seems like a big thing to miss, but maybe I'm the one that missed it.

[Nate]

So I wanted to bring this up for anyone else that uses Roger, it turns out they are technically covering SE tax incorrectly because they don't include the 92.35% in calculating SE tax and the SE tax deduction, in fact, Roger says during the lecture videos that if you have Sch C income less than $400 then you won't have SE tax, and that's technically incorrect, he should be saying if you have Sch C income less than $433 (400/92.35%) then you won't have SE tax. If you look at line 4 of Schedule SE, they have you multiply line 3 (combination of Sch F income, Sch C income, and Conservation Reserve Program payments) by 92.35%, then they say if that is less than $400 then you won't have SE tax. Just thought I'd bring this up, cause one wrong answer may be the difference between a 74 and 75, and if you are learning SE tax the wrong way, you'll probably do it wrong on the exam too.

[Recked]

Moment of honesty here. I've been working full time in tax for 16 years and I was not aware of the 92.35%.
I always ballpark the SE tax at 15.3% and the deduction at half that, then just let my software do the calculations.

I don't remember any exact questions from my exam, but I think knowing the concept is more important than the actual numbers as stated above.
But I guess if you are learning it you might as well learn it correctly the first time.

Learn something new everyday.

[Nate]

I've only worked in tax for 1 year but I also had no clue this even existed. There's a TBS in Roger where they provide SE tax of $500, and you just divide that by 2 to get the SE tax deduction, which is correct, but Sch C income wasn't provided in the question so you have to calculate that using SE tax, which is calculated as $3,268 (500/15.3%) and I just assumed that was correct. Yesterday I was working on a tax return and I thought for the heck of it I'd calculate SE tax just for practice with the exam, and my calculation was off, so I decided to look at Sch SE to figure it out, and that's when I discovered the 92.35%, which I asked my bosses and they confirmed. So it really was just complete luck on my end and miscalculating SE tax that allowed me to discover this.

[Author]

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