Boy am I confused.
Are you saying you never pay self employment tax for the royalty earnings? I mean…maybe that’s right…but for most other self employed income, that is paid when the taxes are filed.
FICA and self-employment tax are not the same thing.
I know that…but isn’t part of self employment tax ones share of SS payments.
Ah yes… you are right. I did a brain dump there.
So…back to the OP…I don’t understand the comment “we didn’t pay FICA”. Self employed folks pay their SS payments as part of self employment tax when they file their taxes.
I believe.
Are you saying you have never paid this self employment tax?
Self-employment tax is technically SECA, not FICA.
It sounds like a distinction without a difference.
The Self-Employment Contributions Act (SECA) of 1954 is a tax law that requires self-employed persons or owners of small businesses to pay both the employer and employee portions of the Federal Insurance Contributions Act (FICA) tax that funds Social Security and Medicare. The basic tax rate for SECA tax payments is twice the percentage rate that employees pay at source from their paychecks in order to cover both the employer and employee portion of the payment. SECA taxes are computed on the basis of net earnings, defined as the gross income derived from business activities, less the expenses incurred in the course of doing business.
Indeed it is. This thread seems to be full of miscommunication based on failure to make distinctions with a difference, though.
Ok…so is this OP paying SECA? If so…how does the income requiring this get transferred over to the FAFSA.
If the OP is paying SECA, which I interpret their posts as saying is NOT the case, Box 14 Code A of the 1065 K-1 is where you pick up the number for the FAFSA.
It’ll also show up on Schedule SE, so if someone familiar with tax returns and the FAFSA instructions had a copy of the 1040, they could figure out what was on the K-1 without the K-1 itself. But in the absence of such a person, sticking the the FAFSA instructions and the forms and lines therein seems like a better course of action.
“Royalties” are confusing because if reported on line 17 of the 1040, they are not subject to self-employment tax.
But some people get royalties and report them as self-employment — in which case, they are accounted for separately, and are NOT reported separately on line 17.
These royalties are flowing through from a partnership.