Tax Preparation Help
 Publication 560 2008 Tax Year

### 5.   Table and Worksheets for the Self-Employed

As discussed in chapters 2 and 4, if you are self-employed, you must use the following rate table or rate worksheet and deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan.

First, use either the rate table or rate worksheet to find your reduced contribution rate. Then complete the deduction worksheet to figure your deduction for contributions.

The table and the worksheets in chapter 5 apply only to self-employed individuals who have only one defined contribution plan, such as a profit-sharing plan. A SEP plan is treated as a profit-sharing plan. However, do not use this worksheet for SARSEPs.

Rate table for self-employed.   If your plan's contribution rate is a whole percentage (for example, 12% rather than 12½%), you can use the following table to find your reduced contribution rate. Otherwise, use the rate worksheet provided later.

First, find your plan contribution rate (the contribution rate stated in your plan) in Column A of the table. Then read across to the rate under Column B. Enter the rate from Column B in step 4 of the Deduction Worksheet for Self-Employed.

Example.

You are a sole proprietor with no employees. If your plan's contribution rate is 10% of a participant's compensation, your rate is 0.090909. Enter this rate in step 4 of the Deduction Worksheet for Self-Employed.

Deduction Worksheet for Self-Employed

Rate worksheet for self-employed.   If your plan's contribution rate is not a whole percentage (for example, 10½%), you cannot use the Rate Table for Self-Employed. Use the following worksheet instead.

Rate Worksheet for Self-Employed

 1) Plan contribution rate as a decimal (for example, 10½% = 0.105) 2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105) 3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 0.095)

Figuring your deduction.   Now that you have your self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed.

Community property laws.   If you reside in a community property state and you are married and filing a separate return, disregard community property laws for step 1 of the Deduction Worksheet for Self-Employed. Enter on step 1 the total net profit you actually earned.

Deduction Worksheet for Self-Employed

Rate Table for Self-Employed

 Column AIf the plan contri- bution rate is: (shown as %) Column BYour rate is: (shown as decimal) 1 .009901 2 .019608 3 .029126 4 .038462 5 .047619 6 .056604 7 .065421 8 .074074 9 .082569 10 .090909 11 .099099 12 .107143 13 .115044 14 .122807 15 .130435 16 .137931 17 .145299 18 .152542 19 .159664 20 .166667 21 .173554 22 .180328 23 .186992 24 .193548 25* .200000* *The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan.

Example.

You are a sole proprietor with no employees. The terms of your plan provide that you contribute 8½% (.085) of your compensation to your plan. Your net profit from line 31, Schedule C (Form 1040) is \$200,000. You have no elective deferrals or catch-up contributions. Your self-employment tax deduction on line 27 of Form 1040 is \$8,723. See the filled-in portions of both Schedule SE (Form 1040), Self-Employment Income, and Form 1040, later.

You figure your self-employed rate and maximum deduction for employer contributions you made for yourself as follows.

See the filled-in Deduction Worksheet for Self-Employed later.

Rate Worksheet for Self-Employed

 1) Plan contribution rate as a decimal (for example, 10½% = 0.105) 0.085 2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105) 1.085 3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 0.095) 0.078

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Portion of Form 1040 and Portion of Schedule SE