We decide whether to calculate Section B of Schedule SE, based on your total wages subject to Social Security plus your self-employment income (or based on your desire to use the farm or nonfarm optional method).
We start by figuring your wages subject to Social Security. This amount starts as the total of your "Social Security wages" plus "Social Security tips" from your W-2 forms. To this result, we compare the "Medicare wages" plus "Medicare tips" from your W-2 forms. The larger of these two numbers becomes your "wages subject to Social Security" for this purpose.
Next, we figure your self-employment income. We begin by looking through all of your Schedule C's. We add the net income from Schedule C (line 31) to your total net income if all of these conditions apply:
You're not a statutory employee (see Schedule C line 1); and
You're not a minister filing Form 4361 (see Schedule C line 1); and
You materially participated (see Schedule C line G); and
The "X" box for Self versus Spouse at the top of Schedule C matches the copy (Self or Spouse) of Schedule SE.
Next, we add to the Schedule C amount the amount from Schedule C-EZ, line 3 if you meet these conditions: (1) you're not a statutory employee (see Schedule C-EZ, line 1) (2) you're not a minister receiving a self-employment exemption based on Form 4361 (see Schedule C line 1); and (3) the "X" box for Self versus Spouse at the top of Schedule C-EZ matches the copy (Self or Spouse) of Schedule SE.
We then do the same for Schedule F, adding in the net income from that form (line 36) if you materially participated (line E).
We then add the self-employment earnings from your K-1's, line 15a , where the self/spouse indicator on the K-1 at that line matches this copy of Schedule SE.
If you're a general partner in a partnership (line 1), we then subtract from your self-employment income any section 179 deduction as shown on your K-1, lines c1 and c2.
Also, we require that you have entered something in the Medicare Wages box on your W-2 before we'll "X" the box for using Part B.
We also use the self-employment income amount we have just calculated on lines A1a and A2 of Schedule SE.