TN 10 (02-92)

RS 02505.055 How to Count NE (and Losses) From SE Under the ET


NESE and net loss from SE generally have the same meaning for ET purposes as for coverage purposes. However, the amounts used for ET purposes in a TY can differ from the amounts used for coverage purposes.


1. How to Count NESE

Count the following amounts when determining NESE for ET purposes:

  • All Self-Employment Income (SEI)

    See RS 01804.000 ff. for the definition of SEI; also, its relationship to NESE, and the TY minimum and maximum totals.

Round SEI to the next lowest dollar when applying deductions under the ET.

  • Count all NESE, including amounts above the maximum limitation for SE Tax and amounts under $400. See RS 01801.001 ff.

For tax years after 1989, a tax credit of 7.65 percent is deducted from the actual net profit to determine NESE. A multiplier of .9235 is applied to the net profit to determine NESE. The multiplier applies to NESE above the SECA maximum. However, the deduction is not applied to net profit when the resulting amount is less than $400. In this case the actual new profit is the earnings for deduction purposes.

  • Count any NESE of an individual granted an exemption from SE tax by the Internal Revenue Service. These are earnings from a noncovered trade or business. In these cases, the new profit is the earnings for deduction purposes without application of the SE tax credit multiplier. See RS 01802.064 and RS 01802.270. When the optional method of computing and reporting farm or non-farm NESE is used, the amount so reported is the amount used for ET purposes. See RS 01803.160 and RS 01803.180.

2. Treatment of Net Loss from SE

a. How to Compute Net Loss From SE

Use the amount by which allowable business expenses exceed business income for net loss from SE. Generally, this has the same meaning for ET purposes as for coverage.

b. How to Use Net Loss from SE Under the ET

Use the loss to reduce gross wages and other NESE for the same TY. Do not apply the SE tax credit multiplier of .9235 percent that is applicable for net profit for TYs after 1989 to net losses from self-employment. Use the actual net loss to reduce wages earned during the year to determine earnings for deduction purposes. See SSR 61-57 for illustration of SE loss used to reduce total earnings from wages for ET purposes.

NOTE: See RS 02510.017 regarding the SP posting procedure in these cases.

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RS 02505.055 - How to Count NE (and Losses) From SE Under the ET - 06/15/1995
Batch run: 07/09/2013