Question

Fernando is a retired auto mechanic. Since retiring four years ago, he has made stained glass windows. Because he has only occasional sales, Fernando treats this activ-ity as a hobby. A friend of Fernando’s recommends him to a local merchant who is renovating her office and needs someone to make and install 15 new windows. The job takes Fernando a month to complete, and he is paid $3,000. In preparing his tax return, Fernando is unsure whether the $3,000 is subject to self-employment tax. The instructions accompanying his federal income tax return indicate that a payment is subject to self-employment tax only if an individual is engaged in a trade or business. Write a letter to Fernando explaining whether he is engaged in a trade or a bus.

Answer 1

Dear Fernando:

As you have not made over $4000,00. On the job you just finish. Therefore you are not subject to self-employment tax.

Step-by-step explanation:

Department of the Treasury

Internal Revenue Service

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 (farm or nonfarm) for yourself, you are self-employed.

You also must pay SE tax on your share of certain partnership income and your guaranteed payments.