General Instructions

A Change To Note

For 2002, the maximum amount of self-employment income subject to social security tax is $84,900.

Purpose of Form

Residents of the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and Puerto Rico use Form 1040-SS to:

• Report net earnings from self-employment and pay self-employment (SE) tax. The Social Security Administration uses this information to figure your benefits under the social security program. SE tax applies no matter how old you are and even if you already are receiving social security or Medicare benefits.
• Report and pay household employment taxes.
• Report and pay employee social security and Medicare tax on unreported tips or uncollected social security and Medicare tax on tips or group-term life insurance (see the instructions on page 4 for Part I, line 5).
• Claim excess social security tax withheld.
• Claim the additional child tax credit (bona fide residents of Puerto Rico only).

You may also be required to file an income tax return with the government of Guam, American Samoa, the Virgin Islands, the Commonwealth of the Northern Mariana Islands (CNMI), or Puerto Rico. Check with your local tax office for more details.

Additional Information

For more details, see Pub. 533, Self-Employment Tax, available from most IRS offices. See the instructions for Schedules C and F (Form 1040) for information on business and farm income and expenses.

For details on 2002 tax law changes, see Pub. 553, Highlights of 2002 Tax Changes.

If you expect to owe SE tax of $1,000 or more for 2003, you may have to make estimated tax payments. Use Form 1040-ES, Estimated Tax for Individuals, to make estimated tax payments.

Who Must File

You must file Form 1040-SS if:

1. You, or your spouse if filing a joint return, had net earnings from self-employment (from other than church employee income) of $400 or more (or you had church employee income of $108.28 or more - see Church Employees on page 2); and
2. You do not have to file Form 1040 with the United States; and
3. You are a resident of:
   • Guam,
   • American Samoa,
   • The Virgin Islands,
   • The CNMI, or
   • Puerto Rico. (You may file either Form 1040-PR or Form 1040-SS.)

Note:   Even if you have a loss or little income from self-employment, it may benefit you to file Form 1040-SS and use either "optional method" in Part VI. See page 7.

If 2 and 3 above apply, you also must file Form 1040-SS (or Form 1040-PR in Spanish if you are a resident of Puerto Rico) to:

• Report and pay household employment taxes.
• Report and pay employee social security and Medicare tax on unreported tips or uncollected social security and Medicare tax on tips or group-term life insurance (see the instructions on page 4 for Part I, line 5).
• Claim excess social security tax withheld.
• Claim the additional child tax credit (bona fide residents of Puerto Rico only).

When To File

If you file on a calendar year basis, file by April 15, 2003. If you file on a fiscal year basis, file by the 15th day of the 4th month after the close of your fiscal year.

Where To File

Internal Revenue Service Center, Philadelphia, PA 19255.

Amount You Owe

Enclose your check or money order for the full amount with Form 1040-SS. Make it payable to the United States Treasury. Do not send cash. Write 2002 Form 1040-SS and your name, address, daytime phone number, and social security number (SSN) on your payment. If you are filing a joint return, enter the SSN shown first on your Form 1040-SS.

To help process your payment, enter the amount on the right side of the check like this: $ XXX.XX. Do not use dashes or lines (for example, do not enter $ XXX- or $ XXX00/100).

Third Party Designee

If you want to allow a friend, family member, or any other person you choose to discuss your 2002 tax return with the IRS, check the Yes box in the Third Party Designee area on page 1 of Form 1040-SS. Also enter the designee's name, phone number, and any five numbers the designee chooses as his or her personal identification number (PIN). But if you want to allow the paid preparer who signed your return to discuss it with the IRS, just enter Preparer in the space for the designee's name. You do not have to provide the other information requested.

If you check the Yes box, you, and your spouse if filing a joint return, are authorizing the IRS to call the designee to answer any questions that may arise during the processing of your return. You are also authorizing the designee to:

• Give the IRS any information that is missing from your return,
• Call the IRS for information about the processing of your return or the status of your refund or payment(s), and
• Respond to certain IRS notices that you have shared with the designee about math errors, offsets, and return preparation. The notices will not be sent to the designee.

You are not authorizing the designee to receive any refund check, bind you to anything (including any additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

The authorization cannot be revoked. However, the authorization will automatically end no later than the due date (without regard to extensions) for filing your 2003 tax return. This is April 15, 2004, for most people.

Signature and Date

Sign and date your return. It is not valid unless you sign it. If you are filing a joint return, your spouse must also sign.

Generally, anyone you pay to prepare your return must sign it by hand in the space provided. Signature stamps or labels cannot be used. The preparer must give you a copy of the return for your records. Someone who prepares your return but does not charge you should not sign your return.

Daytime Phone Number

Providing your daytime phone number may help speed the processing of your return. If we have questions about items on your return and you can answer our questions over the phone, we may be able to continue processing your return without mailing you a letter. If you are filing a joint return, you may enter either your or your spouse's daytime phone number.

How To Get Forms and Publications

By Personal Computer

You can access the IRS Web Site 24 hours a day, 7 days a week, at www.irs.gov to download forms, instructions, and publications. You can also reach us using File Transfer Protocol at ftp.irs.gov.

By Phone

If you are a resident of the Virgin Islands or Puerto Rico, you can order forms and publications 24 hours a day, 7 days a week, by calling 1-800-TAX-FORM (1-800-829-3676).

In Person

Puerto Rico.   U.S. Internal Revenue Service, 7 Tabonuco Street, Suite 120, San Patricio Office Center, Guaynabo, PR 00966; or send your order to Eastern Area Distribution Center, P.O. Box 25866, Richmond, VA 23289-5866.

Virgin Islands.   Federal Building, Room 216, 5500 Veterans Drive, Charlotte Amalie, St. Thomas, VI 00802; V.I. Bureau of Internal Revenue, 9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802; or V.I. Bureau of Internal Revenue, 4008 Estate Diamond, Christiansted, St. Croix, VI 00820.

Guam.   Internal Revenue Service, Pacific Daily News Bldg., 230 O'Hara St., Suite 902, Agana, GU 96910.

American Samoa.   American Samoa Government, Tax Division, Suite 111, Pago Plaza, Pago Pago, AS 96799; or Tax Office, EOB Building, Utulei, AS 96799.

CNMI.   Division of Revenue and Taxation, CNMI, Central Office, Civic Center, Saipan, MP 96950.

Name and SSN

To ensure proper credit to your social security account, enter your name and social security number (SSN), and your spouse's if filing a joint return, exactly as shown on your social security card. If you do not have an SSN, get Form SS-5, Application for a Social Security Card, from an SSA district office.

Who Must Pay SE Tax?

Self-Employed Persons

You must pay SE tax if you had net earnings of $400 or more as a self-employed person. If you are in business for yourself or you are a farmer, you are self-employed.

You must also pay SE tax on your share of certain partnership income and your guaranteed payments. See Partnership Income or Loss on page 6.

Church Employees

If you had church employee income of $108.28 or more, you must pay SE tax on that income. Church employee income is wages you received as an employee (other than as a minister or member of a religious order) of a church or qualified church-controlled organization that has a certificate in effect electing exemption from employer social security and Medicare taxes.

If your only income subject to self-employment tax is church employee income, skip lines 1 through 4b in Part V. Enter zero on line 4c and go to line 5a.

Ministers and Members of Religious Orders

In most cases, you must pay SE tax on salaries and other income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner. But if you filed Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, and received IRS approval, you will be exempt from paying SE tax on those net earnings. If you had no other income subject to SE tax, you are not required to file Form 1040-SS. But if you had other earnings of $400 or more subject to SE tax, see line A in Part V.

If you must pay SE tax, include this income on Part IV, line 1. But do not report it on line 5a of Part V; it is not considered church employee income. Also, include on Part IV, line 1:

• The rental value of or allowance for a home furnished to you (including payments for utilities) and
• The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience.

Do not include on Part IV, line 1:

• Retirement benefits you received from a church plan after retirement or
• The rental value of or allowance for a home furnished to you (including payments for utilities) after retirement.

If you were a duly ordained minister who was a church employee and you must pay SE tax, report in Part IV your income and expenses from performing services as a minister. Enter the net amount on Part V, line 2.

For details, see Pub. 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

Note:   If you have ever filed Form 2031 to elect social security coverage on your earnings as a minister, you cannot revoke that election.

Members of Certain Religious Sects

If you have conscientious objections to social security insurance because of your membership in and belief in the teachings of a religious sect recognized as being in existence at all times since December 31, 1950, and which has provided a reasonable level of living for its dependent members, you can request exemption from SE tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. If you filed Form 4029 and have received IRS approval, do not file Form 1040-SS. See Pub. 517 for details.

Employees of Foreign Governments or International Organizations

You must pay SE tax on income you earned as a U.S. citizen or a resident of Puerto Rico employed by a foreign government (or, in certain cases, by a wholly owned instrumentality of a foreign government or an international organization under the International Organizations Immunities Act) for services performed in the United States, Puerto Rico, Guam, American Samoa, the CNMI, or the Virgin Islands. Report income from this employment on Part IV, line 1. If you performed services elsewhere as an employee of a foreign government or an international organization, those earnings are exempt from SE tax.

Commonwealth or Territory Residents Living Abroad

If you are a resident of Guam, American Samoa, the Virgin Islands, the CNMI, or Puerto Rico living abroad, in most cases you must pay SE tax.

Exception.   The United States has social security agreements with many countries to eliminate dual taxes under two social security systems. Under these agreements, you must generally pay social security and Medicare taxes only to the country you live in.

The United States now has social security agreements with the following countries: Australia, Austria, Belgium, Canada, Chile, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. Additional agreements are expected in the future.

If you have questions about international social security agreements, you can:

• Visit the Social Security Administration (SSA) Web Site at www.ssa.gov/international,
• Call the SSA Office of International Programs at (410) 965-3544 or (410) 965-3554 (these are not toll-free numbers), or
• Write to Social Security Administration, Office of International Programs, P.O. Box 17741, Baltimore, MD 21235-7741. (Do not send Form 1040-SS to this address.)

Even if you do not have to pay self-employment tax because of a social security agreement, you may still have to file a tax return with the Internal Revenue Service.

More Than One Business

If you were a farmer and had at least one other business or you had two or more businesses, your net earnings from self-employment are the combined net earnings from all of your businesses. If you had a loss in one business, it reduces the income from another. Complete and file only one Form 1040-SS for any 1 year. Attach a profit and loss statement for each trade or business, and include the net earnings in Part V.

Joint returns.   If both you and your spouse have self-employment income from a farm or nonfarm business, each of you must complete and file a separate Part III or Part IV. Be sure to enter at the top of each Part III or Part IV the name and social security number of the spouse who owns the business. Each of you must also complete a separate Part V.

Community Income

In most cases, if any of the income from a business, including farming, is community income, all of the income from that business is considered self-employment earnings of the spouse who carried on the trade or business. The identity of the spouse who carried on the trade or business is determined by the facts in each situation. If you and your spouse are partners in a partnership, see Partnership Income or Loss on page 6.

Fiscal Year Filers

If your tax year is a fiscal year, use the tax rate and earnings base that apply at the time the fiscal year begins. Do not prorate the tax or earnings base for a fiscal year that overlaps the date of a rate or earnings base change.

Specific Instructions

The accounting method you used to record your farm income determines whether you complete Section A or C of Part III.

Cash method.   Include all of your income in the year you actually get it. Generally, you deduct your expenses when you pay them.

Accrual method.   Include your income in the year you earned it. It does not matter when you get it. You deduct your expenses when you incur them.

Part I - Total Tax and Credits

Line 1

Check the filing status that applies to you.

Single.   Your filing status is single if:

• On the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree or
• You meet all five of the following conditions.
  1. You lived apart from your spouse for the last 6 months of 2002. Temporary absences for special circumstances, such as business, medical care, school, or military service, count as time lived in the home.
  2. You file a separate return from your spouse.
  3. You paid over half the cost of keeping up your home for 2002.
  4. Your home was the main home of your child, adopted child, stepchild, or foster child for more than half of 2002.
  5. You could claim the child as a dependent (see Pub. 501, Exemptions, Standard Deduction, and Filing Information).

Married filing jointly.   You can choose this filing status if you were married and both you and your spouse agree to file a joint return. If you choose to file a joint return, check the box for married filing jointly and be sure to include your spouse's name and social security number (SSN) on the lines provided below your name and SSN. If your spouse also had self-employment income, complete and attach a separate Part V and, if applicable, Part VI. If necessary, attach a separate Part III or Part IV for your spouse's farm or nonfarm business.

Joint and several tax liability.   If you file a joint return, both you and your spouse are generally responsible for the tax and any interest or penalties due on the return. This means that if one spouse does not pay the tax due, the other may have to.

Married filing separately.   You can choose this filing status if you were married. This method may benefit you if you want to be responsible only for your own tax.

Line 4

If either of the following applies, see Schedule H (Form 1040), Household Employment Taxes, and its instructions to find out if you owe these taxes.

1. You paid any one household employee cash wages of $1,300 or more in 2002.
2. You paid total cash wages of $1,000 or more in any calendar quarter of 2001 or 2002 to household employees.

Line 5

Employee social security and Medicare tax on tips not reported to employer.   Complete Form 4137 if you received cash and charge tips of $20 or more in any month and did not report all of those tips to your employer. On the dotted line next to line 5, write Tax on Tips, and the amount of tax due (from Form 4137, line 12). Be sure to include this tax in the total for line 5. Attach to Form 1040-SS the completed Form 4137 and Schedule U (Form 1040) (found at the bottom of Form 4137).

Uncollected employee social security and Medicare tax on tips.   If you did not have enough wages to cover the social security and Medicare tax due on tips you reported to your employer, the amount of tax due should be identified with codes A and B in box 12 of your Form W-2AS, W-2GU, or W-2VI. Include this tax in the total for line 5. Enter the amount of this tax and Uncollected Tax on the dotted line next to line 5.

Uncollected employee social security and Medicare tax on group-term life insurance.   If you had group-term life insurance through a former employer, you may have to pay social security and Medicare tax on part of the cost of the life insurance. The amount of tax due should be identified with codes M and N in box 12 of your Form W-2AS, W-2GU, or W-2VI. Include this tax in the total for line 5. Enter the amount of this tax and Uncollected Tax on the dotted line next to line 5.

Line 6

Enter any estimated tax payments you made for 2002 including any overpayment from your 2001 return that you applied to your 2002 estimated tax. If you or your spouse paid separate estimated tax but are now filing a joint return, add the amounts you each paid and enter the total on line 6. If you and your spouse paid joint estimated tax but are now filing separate returns, you can divide the amount paid in any way you choose as long as you both agree. If you cannot agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2002. For an example of how to do this, see Pub. 505, Tax Withholding and Estimated Tax.

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